AMERICA RUNS ON DEBT!
According to a recent study, a whopping 80% of Americans have debt, ( https://www.pewtrusts.org/~/media/assets/2015/07/reach-of-debt-report_artfinal.pdf?la=en). Mortgages are the most common debt, followed closely by credit card, student loans and car loans. Do you have debt? Is debt keeping you from living your best life?
I was blessed to marry someone who did not have a lot of debt. Compared to me, my wife has minuscule debt, about ~$20,000 in student loans.
I have student loans, car loan, credit cards and mortgage! I have it all, I am part of the statistic. But in 2020 I said, NO MORE. I desire a life without debt. So, I set out on a marathon to pay down my debt and become wealthy.
I will break down my debt in this post because I want to be transparent and inspire you to tackle your debt and start building wealth, no matter how unmanageable it may seem. And this is also a way for me to hold myself accountable.
Akei’s debt breakdown*:
Student loans – $120,000
Mortgage – $140,000
Car loan – $28,000
Credit cards – $15,000
*These numbers are rounded for simplicity.
Now if you are looking at these numbers with your eyes wide open, I KNOW! Now you see why my debt is astronomical compared to my wife’s. I am not sure why she married me! Ha-ha.
I have given myself a timeline to pay off the credit cards and half of the auto loan by end of 2021. That’s almost $30K in 12 months.
I know I am not the only one tackling debt, but I want to be one of those people who overcomes the debt crisis. The next post covers my detailed debt-repayment plan.
Your plan is good, and I am happy that you have a mortgage (so you are not throwing money away renting).
My advice in tackling all this debt is:
1. if you can, try and increase your income (this is easier in some industries like tech which only requires switching jobs)
2. Prioritize tackling the debt with highest interest between the credit card vs auto loan (the student loan will take a while so do it last)
3. Also, besides the 401k amount that your job matches, dont invest any more than that. The debt you have has guaranteed interest while the stock market returns are not guaranteed. Stay on the sidelines until you are out of debt
4. Finally, mortgage debt is good, dont rush paying that. it is actually smarter to have a 30 yr mortgage so you have the lowest payments regardless of the higher interest. The extra cash can get a better return in other investments.
I could keep going lol but ill leave it at that
Hi Robert! Thank you for your comment. My strategy differs just slightly, did you get a chance to read my “Pay down debt” blog?
1. Yes! I did increase my income.
2. I’m definitely using the avalanche method
3. I am currently on track to max out both my 403B and Roth 403B, the stock market does have some guarantee in returns. The yearly average return has been around 8-10%. Index funds, mutual funds, ETFs are a great way to invest long term so I will continue to contribute in my accounts as I pay down my debt.
4. My wife and I are planning on refinancing our mortgage and using the equity to buy rental property.
I recommend investing even while paying down debt. You do not want to miss out on your money compounding over time.