America is a great country! But, it’s not perfect. As a capitalist society, Americans have opportunities to succeed financially today more so than almost at any other time in history. But, arguably, those opportunities are not equally available to everyone. Debt is too easy to come by and too many people are not financially educated or trained to handle that debt. Financial education isn’t adequately taught in schools. And, the subject of money remains taboo in many households. I’ve come to a realization recently. That is, debt is a thief. It robs us of our future selves. Let’s see how.
Why Debt Is A Thief?
I recently found myself in credit card debt. It was as high as over $11000. Thankfully, I was able to get it down to around $7500 with my April credit card payment but even that is still too high.
I had so many plans this year. I want to start saving for a down payment for another property, but I can’t! Why? Because I have debt. Not just any debt, but bad debt! The interest rate on my credit card is 15.99% So, it makes sense to pay that off rather than trying to invest right now. But that’s my point! I can’t save for a down payment on my house because I need to get rid of the debt first.
In addition to saving for a down payment, I also want to save for my retirement. But, I can’t really do that to as much extent as I would like because my credit card debt is too high. In general, because paying off the debt is a guaranteed rate of return ($15.99%), it makes more sense to pay off the debt rather than try to invest in the market.
In all honesty, I still maximize my Roth 401k and Roth IRA every year – even with the debt. But, I don’t contribute as much to my taxable brokerage account as much as I would like because of the debt.
So, in case it isn’t clear yet, bad debt is a thief. It robs you of your future goals and aspirations. Having this debt is setting me back at least a year! If I’m not careful, it will set me back for a lot longer than that.
A Comment On Good Debt
In my opinion, not all debt is bad. Getting a mortgage on a house can be good debt if the property is bought the right way. That’s because, that debt could be making you money. Whether it’s for appreciation, tax benefits, cash flow, leverage, etc, there are multiple benefits to investing in real estate. Having a mortgage can give you access to those benefits.
Of course, if the property isn’t bought right, then getting a mortgage could be a nightmare. So, it all depends.
Arguably, having student loans can be good debt, if handled properly. Incurring $50k to learn Basket Weaving may not be the best way to use student loans. But, incurring $50k to get a worthwhile degree that’s going to pay you well after graduation might be worth it.
The point is, there is bad debt and good debt. Good debt helps you achieve your financial goals. But bad debt is a thief!
Conclusion
Although debt is a thief, I won’t let it rob me blind. I am working towards payoff my credit card debt. Additionally, starting next week, I will be able to resume my driving for payments project temporarily before I go on a two-week vacation. So, basically I drive for Uber and Lyft and use the proceeds to help pay down my credit card. Once the credit card debt is gone, I will resume the driving for dividends project. That is, I will drive for Uber and Lyft and use the proceeds to purchase dividend growth stocks. So, I am hoping to do a lot, starting in the next two weeks to improve my financial position.
With inflation high and rising, now it’s the perfect time to get my financial house in order. Having high credit card debt is inconsistent with my long-term plans. It’s going to be hard, but it’s well worth it.
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