Debt is the worst thing to your financial health. Most Americans have some form of debt. The numbers of individuals with large amounts of debt in this country are astonishing. Credit cards, car payments, student loans, business loans, and personal loans are poison to your financial life. A mortgage is good debt and a necessity, so I do not factor that into this conversation.
What does debt do to you? It makes you a SLAVE. Just like how accepting insurance into your private medical practice does.
You cannot be truly free if you live under a mountain of debt. You will never get ahead because all the money coming in will be going out to interest and debt.
Most people have no idea what it is like to be debt free. Few know the power it affords you.
What does being debt free afford you to do?
- It allows you to give the middle finger to the man. Sick of your job? Have a side business spinning off money? You can leave as you please. You do not have thousands of dollars of “payments” to make every month. You can get by with the bare minimum. A truly freeing mental place to be.
- It allows you to invest your money into the future either being retirement or a side business. So, what does that do? It increases your freedom even more.
- It allows you to start a business without taking a loan out. This automatically puts your business on the path of positive cash flow.
DO NOT TAKE A BUSINESS LOAN OUT. Let me make something very clear to you. Starting your business with debt is one of the worse decisions you can make. Your business starts off in the RED. How long does it take to generate $100,000 in profit to pay that off? Quite some time. If you are not paying yourself then you could potentially pay it off in a year but if you withdraw some form of compensation from your business, it could take you YEARS before your business is profitable.
This makes the uphill battle of a start up business much steeper than it should be. Not only financially, but mentally. Seeing your financial statements always in the red will be a continual death blow to your enthusiasm and fortitude. If your business is not doing well, it will increase the amount of stress and anxiety in your life four-fold.
I started every one of my businesses with personal money I saved. Do you know what that means? In the first 3 months I was MAKING MONEY, not PAYING OFF DEBT. It was fantastic! I made back my initial investment in that first 3 months without issue. This is a huge milestone in your business. My businesses now generate a significant profit every month totally DEBT FREE. This has afforded me to expand my current businesses, start new ones, and invest in real estate.
I also recently got out of personal debt. AN AMAZING FEELING. Now my personal bank account grows every month. My personal expenses are very little. This will allow me to retire early and the amount of stress in my life has decreased significantly. It is worth the effort.
So, what is a reasonable strategy to become debt free? It is called the snowball effect strategy.
The snowball effect strategy for debt starts by paying off one debt at a time. First select a cheap debt that can be paid off easily. Once that debt is paid off the money you save by not having that payment any longer is put towards another debt. Once that debt is paid off you use the money from those 2 old debt payments to pay off a 3rd and so forth and so forth. You do not increase your expenditures or living expenses with the money you save. You continue to live the same while aggressively paying off your debt. You can realistically be debt free in a matter of 2-3 years doing this.
Here is an example (numbers have been rounded for simplicity purposes):
You have a $1,000 credit card balance, another $5,000 credit card balance, $10,000 in student loans, $30,000 on a car loan, and $200,000 on a mortgage.
First pay off the credit card. You now have an extra $100 a month. You now add that $100 to the $500 a month payment on the $5,000 credit card. Instead of taking 10 months to pay off that card it only takes you 8 months because of that extra $100.
With that extra $600 you have you now add it to your $500 a month student loan payment. You just went from 22 months of payments to 9 payments. Huge difference.
At this point you have an extra $1100 a month to go towards your $700 monthly car payment. Instead of 46-50 months of payments at $700 a month you pay it down with $1800 a month. Now you only have 16-18 months of payments!
Add the $1,800 you are saving a month now to your $1,200 mortgage payment and you could have your house totally paid off in 5-6 years. You just went from $250,000+ of debt to debt free in less than a decade.
Of course, if you follow the Elite Nurse Practitioner Model of having a part time job, multiple side businesses, low expenses, avoiding insurance, and only accepting cash in your practices you could pay that off in 3 years. How awesome would that be? Very…
Your goal as an elite nurse practitioner is to be debt free in your business and personal life. You will be light years ahead of your NP, MD, DO and PA colleagues. You can tell administration to kiss your ass if you are not happy. You literally hold the power to your own life when you are debt free.