choicesDebt and investment are not often talked about in the same sentence.

After all, when someone is ridden with debt, it’s hard to think about investment. All your extra money needs to go towards servicing that debt, leaving nothing left over for investment.

There are some exceptions where certain investments balance well with certain low-interest debt, but these are in the minority. People with debt have to put a lot of attention and energy into getting rid of their debt, otherwise it’ll never happen. Investments are something to think about much later, if at all.

 

But debt and investment are actually two sides of the same coin. Think of your net worth as a line graph, with Zero on the horizontal axis. When you’re in debt, you’ve got negative net worth. Each debt account you have, whether through a credit card or a loan of some kind, is represented in the amount of negative net worth beneath the Zero line on that graph.

This negative net worth grows at specific rates each year, determined by the Annual APR attached to each credit card, loan, or other debt. You can do a little math and figure out just how much and how fast your debt grows each year. Sometimes it’s a little scary to think about.

Without getting too caught up in that kind of thinking, let’s talk about how this is similar to investment. When you really think about it, one person’s debt is another person’s investment. If you’re paying 13.9% annually on that credit card, you’re paying the company and its shareholders. If you’re paying 4.59% on your mortgage, you’re paying the bank and its investors. So how do you go from being the paying to being the one paid?

 

The answer is: little by little. Debt doesn’t pay itself off overnight. It’s important for debt to be paid off fully before investment begins in earnest. This is because, just like debt, an understanding of your own personal investments is based on how much money you’ll bring in every year.

Lots of investments strive to bring in 8% a year. You see that number a lot when we talk about retirement investments. These are investments that are supposed to be not so risky, and they aren’t, but they don’t have huge returns either.

 

Other forms of investment have greater chances of turning up big returns, but they are usually more risky than conservative retirement investment. This is by design, and is relevant to an entirely different kind of investor. ETX Capital represents a fast-paced speculations market built around the value behaviors of lots of different financial options and indices. Unlike investment brokerage platforms that actually sell you shares, ETX customers are saved the expense and instead bet directly on the values of options that they do not actually own.

It’s a great way to get into investment with not very much money, while developing the skills that will go on to greater investment heights as your personal capital is turned from debt to investment.

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bundle of receiptsYou do it.  You know you do.  And it’s okay… I do it too.

I’m talking about worry.  Specifically, worrying about your money.  How much you make, how much you spend, how to get out of debt, or how to avoid falling into debt.

I actually don’t worry nearly as much as I used to.  Here’s how I quit worrying about money:

Save Early, Save Often

Even as a 15-year-old lumber yard warehouse sweeper, my dad told me to keep back a part of my paycheck.  Over the years, as I made more, I began to save a little more as well.  I even followed Dave Ramsey’s Drive Free, Retire Rich program to help stay out of car loan debt and help pad my savings.

Saving money, whether it’s a savings account at your bank or a Roth IRA, is a great way to help you worry less about money.  It pads your life against the unexpected and it shows the progress of your smart money decisions.  And that can be very encouraging!

Don’t Rely on Borrowed Money

This one can be tricky, but the truth is that the less money you owe to creditors, the less you will worry about it.  There’s nothing wrong with borrowing money.  I’ve had a few short-term and long-term loans myself.  And I’ve always tried to pay them off early.  However, for other purchases, I’ve also saved up for the purchase instead of using credit.  This way, I save thousands of dollars in finance and interest charges.

In reality, you probably can’t avoid borrowing money.  It’s almost become a necessity these days.  But it can still be dangerous if not handled properly.  And when it starts to get out of hand, the worry can engulf your entire life.

If you want to find freedom from worrying about your finances, don’t build your life on a foundation of borrowed money.  Keep your credit cards at home, only borrow when absolutely necessary, and pay off your debts as soon as you can.

It’s Time to Plan

If I’ve said it once, I’ve said it a thousand times . . . to be successful at personal finance, you need a plan of attack.

You need a budget, and you need to stick to it.

One of the best ways in which I was able to rid my life of worrying about money was to plan my budget and stick to it.  My first budget was on paper, and later a simple spreadsheet.  Even today, I have everything listed out:  my income, my bills, my savings, my spending.  I see every dollar that’s coming and going.

No matter how simple or complex your budget may be, having a budget, and having the discipline to follow your budget, will help keep your financial life in order and it will help rid your life of financial worry.

Choose Wisely

Lastly, I guarantee that you’ll worry less about money if the love of your life has a similar financial outlook.  Your spouse, or your significant other, or whomever you may be sharing your life with…if that person is like-minded with you concerning finances, you will worry less.  And, together, you will be more financially successful.

Of course, this guarantee only applies to those whose outlook is wise and cautious instead of flippant and careless, lol.

You won’t always agree on everything, but starting out together with a similar outlook will help keep your family on the right financial track.  And as always, when there are disagreements (and there will be), talk about them openly and honestly.

Hope you have a wonderful day!

photo by Steven Depolo

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