How would it feel to be free? Free to chase down the opportunity of a lifetime? Free to spend more quality time with your family? Free to stand up to that bully of a boss once and for all?
Freedom isn’t just for trust fund kids or lottery winners. Freedom is available to anyone who wants it. I know because we created this freedom for ourselves and if we can do it – YOU CAN DO IT TOO!
The biggest enemy of freedom in this country is debt. Debt has become normal in our culture. According to Nerdwallet, the average household carries $132,086 in debt. With 124.6 million households in the US, that’s a whopping $16.5 TRILLION. Our own government owes $19.4 TRILLION and counting.
We live in an – enjoy it now, pay for it later – world. After returning from a month long trip to Greece, the first thing people would say is “it’s gonna take you a long time to pay that off.” When did we come to believe that it’s normal to pay interest on vacations, cars, bikes, clothes, and restaurant meals?
Stick with Me Here
This is the point where most people will stop reading because it’s uncomfortable. I challenge you to stick with me here. Just because debt is normal, doesn’t make it good. I see plenty of people making comfortable six figure incomes who scramble to make everything work at the end of the month. I’m here to tell you that there’s a better way.
I’m not here to judge – we’ve made our own mistakes. But we managed to figure it out and are doing quite well.
What I’m about to tell you has the potential to change your life. It’s hard and it requires sacrifice, but it’ll all be worth it in the end. Plus, everyone I know who has committed to ditching debt will tell you after the fact that it was actually FUN!
I’m not going to talk about how to ditch debt. Instead, I’m going to tell you why. I’m going to share how changing your debt mindset could change your life. The calculations I share are basic and don’t consider all of the variables, but the numbers are very attainable. If you would like to run your own calculations, check out the calculators at Bankrate.com.
When we talk about our story, people assume we came from wealthy families. That couldn’t be further from the truth. Jer grew up in poverty and I was raised in a normal, indebted, middle-class household (The Joneses 😉 ). We had no choice but to figure it out on our own. At the start of our journey, we were clueless.
Fast forward to today, we have been completely debt free since early 2014. No student loans, no mortgage, no car payments. We owe nothing. Our net worth is in the 93rd percentile for our age. I say this not to brag, but to be straight forward with our experience and results. Just as you wouldn’t take diet advice from a 500-pound man, you should never take financial advice from broke people.
- CNN Money reported that 76 percent of Americans were living paycheck to paycheck in 2013.
- A 2015 Bankrate poll found that 62 percent of Americans don’t have enough savings to cover a $500 repair bill.
- According to the Federal Reserve, 30 percent report having no savings at all.
- Investopedia cites a Federal Reserve study that indicates that 43 percent of American families are spending more than they make.
- Nerdwallet reported that lender-reported credit card debt was 155% greater than borrower-reported balances.
We’re in denial about our financial health. Let’s look at what this denial is costing us.
The Financial Cost
As I mentioned, the average American household has $132,000 in debt. That might not seem like much, but just think for a moment what it would be like to have $132,000 sitting in a bank account. It’s a game changer, right?
Let’s look at the long term impact of this $132,000 of debt. Let’s say you’re paying five percent interest on all of your debt and your plan is to pay it off over the next 25 years. Your monthly payment is a modest $772. But over the next 25 years, that $132,000 will cost you close to $100,000 in interest.
Instead, what if you buckled down and paid off that debt in five years? When you achieve your freedom, you decide to put that same $772 into an IRA each month. If you earn an average 10 percent rate of return over the next 25 years, you will have over $1,030,000 (MILLION!). Assuming you have that money invested and you continue to earn 10 percent, you can withdraw $8600 monthly and never run out.
We’re assuming that once you have the $132,000 in debt, you stop accumulating it. In my observation, that’s the opposite of what really happens. What really happens is your car breaks down (more debt), you upgrade homes (more debt), you remodel your kitchen (more debt), you furnish your nursery (more debt) … This is the story of many Americans, in fact, I’m reading a manuscript right now that details this exact struggle.
The other problem with my math is that the saver is likely saving more than $772 per month. Say you started out with the same $132,000 in debt and decided to pay it off in five years. Your monthly debt payment would be less than $2,500 monthly – about $600 per week. When you become debt free, you might loosen the reigns a little, but I doubt you would put that full $2500 toward living large. So let’s assume you’re saving $2000 per month for 25 years at 10 percent. You’ll have over $2.6 Million, enough to withdraw more than $22,000 per month FOREVER.
What could you do if you had $22,000 per month and didn’t have to work? How would your marriage be different? How would your health change? How could you change the world? Think of the freedom you would have.
The Greater Cost
I hope these numbers have encouraged you to reconsider how you feel about debt. These numbers are only part of the equation. Consider that the number one cause of marriage problems is money fights. More than 64 percent of Americans are losing sleep over money worries. Not to mention, debt can actually make you sick. It’s not a matter of if debt will take its toll, it’s a matter of when.
In my opinion, the biggest cost of debt is your freedom. With debt, you are bound by the golden handcuffs that keep you in a career that’s not a good fit. You’re burdened by worry about the next round of layoffs. Your marital bliss is destroyed by fights about how you’ll pay for your daughter’s braces.
When you choose to live a life free from debt, you have the freedom to pursue that dream you’ve always had. You have the freedom to travel or try a new hobby. You’re free to live a life that’s authentic to you and enjoy life to the fullest. You’ll be free to spend your life focusing on what’s most important to you – your health and your family.
A life without debt is a life of freedom. At the end of the day, isn’t that what we’re all working toward? Stop waiting. Let me help you create a plan that will change your life starting today.
How has debt or the lack of affected your life?
Share in the comments below.