Financial Freak Show

It’s pretty easy to pick some goals  then get off your butt and begin working towards them. It’s also just as easy to focus on too many goals at once. In a previous post Take Aim & Kill It I talk about focusing all your financial resources at your smallest debt and working to eliminate it as rapidly as possible. Here I want to talk about why focusing on your debts now is important to reaching those larger goals further in the distance.

A contractor friend once told me this quote:

When you come across an electrical problem and a plumbing problem…don’t try to fix them both at the same time!

In other words don’t try to do too many things at once. I decided I would be better served by focusing on debts now which has allowed me to focus more on financing my retirement and reaching those larger goals. I once heard a story about a apartment maintenance man that bought his employer’s apartment complex with cash and managed to retire with over $3 million in the bank years later (that story could be  total B.S. but I did hear it). Well the story goes like this…He saved his butt off and even though he wasn’t making a ton of money over time he managed to save up enough dough to buy the small apartment complex he worked at and began creating some wealth. That’s pretty much the story. Instead of spending his money he saved his money and as the story goes eventually had enough dough to make a big fat real estate purchase. My guess is this person was a pretty simple dude and probably kept himself out of debt (I don’ see any other way he could really save up a ton of money like this). The obvious advantage though is that he was able to use his income to build something instead of paying for crap he bought in the past + interest.

Even if the story I heard was total B.S. the theory’s still valid. Freeing up your income by clearing your debts will allow you to stash away more money and collect interest instead of paying interest. Do that long enough and large enough and you could eventually turn that stack of money into investments to replace your income and build some wealth.  In my post I Call a Do-over I talk about some other advantages to freeing yourself from your everyday debts. As long as your income keeps going towards interest payments on credit cards and cars its going to be hard to use this money for much of anything else (it’s hard to save it if you don’t really get to keep it). So by wiping out my debts I’m now able to save and invest money much more aggressively because I actually have more available money now. 

I’m a long way from paying cash for my an apartment building but I’m a whole lot closer now that my money stays with me at the end of the month.  Freeing up my income has now given me access to the one tool I need to begin building some wealth, my income. 

If you were able to free yourself up from monthly debt payments what would you do with all that money?