Over the years, I’ve helped hundreds (maybe over a thousand) of people with their personal financial planning. And I can tell you that there are five basic things you want to do to never have a serious financial problem the rest of your life. Here are The 5 Steps to Financial Freedom.
1. Get out of debt and stay out of debt
There is good debt and there is bad debt. There’s only one kind of good debt, the kind that’s going to make you money. Carefully considered business debt can be good debt. Investment debt can be good debt in certain instances. Mortgage debt can be good debt if you work to pay off a mortgage as soon as you can. Almost all other debt is bad debt. Consumer debt like automobile loans, loans to buy appliances and furniture, loans to buy boats, motorcycles and the like — they’re all bad. And credit card debt is terrible debt.
The big problem with debt is that you have the magical power of compound interest working against you rather than for you. The average American has $8,000 in credit card debt. If that’s you and you’re making the minimum payment, it will take you 26 years and 8 months to pay what you owe. And you will end up paying $11,423 in interest.
I hope you enjoyed whatever you bought for that $8,000 because it will be the most expensive $8,000 you ever spent.