Doesn’t paying off debt feel like an invitation to spend money all over again? We work hard, earn money and finally eliminate debt, only to strongly desire to get into more of it. Its like the instant my credit card statement shows $0.00, I now have 10 grand to spend! How do we overcome this urge and keep moving forward after paying off debt?
Ask your self these questions:
- What did my parents tell me about money?
- How did they use debt?
- Were they ever out of debt, and if so what did they do?
- When we were younger how did we see our parents paying for merchandise?
Take some time to reflect on these questions. Can you remember a time when your parents were fighting over money? What about a time you vividly remember a lesson indirectly taught about money and the way your household was thinking of it?
I can remember a time, back in 2008, when my parents were struck with fear. Their nest eggs had dropped considerably and they didn’t know what to do. Both had stable and secure jobs that weren’t going to fire them, however they were scared of money.
They were talking about how “we can’t afford that right now” even when they were still making the same amount of money. They took on lots of debt, sold off some of their assets and cut back on our lifestyle.
Debt Mistakes
- Using the phrase “We Can’t Afford That Right Now”
- This subconsciously shuts off the possibility of ever owning it, creating in our mind the idea that it is not for us. Thus, creating the opportunity to use debt and financing to acquire it.
- Feeling pressured to take on credit card debt during hard times
- It’s easy to use a credit card limit to be our financial back up, only digging us deeper into the hole. We need to set up an emergency fund of 3-6 months worth of expenses to avoid using a credit card for unexpected expenses.
- Increasing ones lifestyle using debt
- Taking lavish trips and buying cool clothes on debt with nothing to back it up or the ability to pay off the card statement at the end of the month is keep us trapped.
*Only use debt as a way to increase your earning capacity or reduce expenses*
If you have just paid off your debt, wait a couple weeks before acquiring any additional debt. Chances are good that your credit worthiness, a.k.a credit score, are going to jump. This will allow you to borrow again in larger quantities.
What should you be borrowing when you have just paid off debt?
Now that you don’t have debt rethink the way you will use debt moving forward. Debt is an amazing tool all wealthy people use to increase their wealth. We do this by buying only things on debt that are going to pay back the debt for us.
Debt for a mortgage on a rental property / Debt to buy or start a business / Loans that help increase earning potential
Now that you are debt free, make a pledge with yourself to only use debt to buy things that will increase your earning potential. Maybe, if you drive Uber a bigger vehicle can create more income, or you can buy the house next door to rent out. I was able to acquire a vending machine business using debt. The revenue from the machines pays back the debt for me, increasing my equity in the business. Now thats good debt!
*Bad debt is a like a bear trap on your life*
Good debt will free us, while bad debt holds us back. The next step is solidifying the notion that buying more things you don’t need to impress people you don’t like is only going to keep you stuck. Stuck in that job you don’t like or from moving to that city you’ve dreamed of. Adding more debt is adding more chains to your current situation.
The key to happiness is progression. We have to grow in order to feel happy.
Tony Robbins
If we don’t have aspirations of moving, getting promoted, jumping into a career path we’ve dreamed of, taking a leap of faith to a new city or anything that is growth to you we aren’t going to be happy. When we add more debt we are adding unhappiness, adding more time to get out of it and keeping us in the same position longer and longer.
*Redirect debt payments to investment savings accounts*
Now is the time of your life. You are in an amazing financial position being debt free. All of that money you were directing to debt, put it in your WAR CHEST account. Build an account that is flush with cash to be an arsenal when great opportunities come along.
- Banks need to see some reserves before allowing you to purchase assets like real estate and businesses.
- In the event of a market downturn you can buy stocks when the prices are low!
- If an opportunity to own something or a bargain comes along you’ll be able to jump on it.
War chest sounds so bad-ass and makes this money game exciting. We have to have a stock pile to buy up bargains when they come along. And trust me they are out there.
Imagine you’re walking through your neighborhood and all of a sudden your neighbor starts wheeling out a motorcycle they want to get rid of. You are the first person to see it and you’re excited! You can see its a beautiful motorcycle that they just don’t feel that way about it anymore. They really need the garage space and they have seen you walking the hood before, so automatically they like and trust you. A quick online search and you are astonished what this motorcycle is worth. They offer to “get rid of it” at 30 cents on the dollar. You shake their hand, open the war chest, aim and FIRE!
These scenarios happen every single day. Turn around and sell the bargain for what it is worth and you’ve just earned a nice profit!
Once you are out of debt build up a war chest so you can take on the world and fire at any opportunity that comes along.
*Increase your knowledge about the financial game*
Rich people look at money and investing as a game. Now that you’re out of bad debt the game is just starting for you! Get off the bench and go make a great play all-star.
Take time to listen to people like Robert Kiyosaki on debt and leveraging it to make more money. The concept can be very new to most people. Also check out my other articles on the best books to read to increase financial literacy, and the most potent way to leverage debt if you’re just starting out!
5 of The Best Financial Books Ever Written
What is the House Hack?
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