Is it possible that people deep in debt are more likely to achieve financial independence and retire early than most?
I’m willing to pronounce it’s far better to come from debt if you want to get financially free. Debt repayment installs specific skills and plans which put the non-debt person at a disadvantage.
After writing another article about debt leading to depression and suicide several weeks ago, I started to think about any upsides to debt. Usually, there are upsides and downsides to every situation.
If debt played such a crushing blow on people and society, could I find some upsides?
I played with this thought for a couple of weeks and read a bunch of articles by people claiming to have paid off vast amounts of debt. A lot of these were people paying off student loan debt. So, these were college-educated people. Does this make a difference?
Maybe.
Maybe the college-educated, in some cases, are more motivated or have a higher income to allow themselves more opportunities to get it done.
Either way, I think if someone managed to pull themselves through a debt crisis, they have better skills to retire early than someone who had never been in debt at all.
There is also an amount of comfort people who have never been in debt have.
Debt-ridden people have gone through a lot. There is a lot of pain there. A lot of emotional scarring might have taken place.
I think though, through all that pain, there are some positives that could help these people achieve early retirement easier than most people on the path.
Financial Independence Retire Early; Know how to pay off debt.
People who have paid off debt already know what it feels like to live without excess money. They know how to live on cheap cooking and not going out to restaurants for meals.
They know how to pass stuff by in the store without making those impulse purchases.
They know what it’s like to say ‘no’ when friends ask them to go out on the town for a night.
People who have paid off debt have lived through the pain of delaying gratification now for the big payoff down the road.
As time goes on, the pain of not spending leads to the gratification of watching their bank account grow.
As the vision of being entirely out of debt becomes clear, the pride and exhilaration that goes with it become clearer also.
If they ever had a hard time setting and accomplishing goals, they will feel more confident in setting and working toward higher goals. Goal setting and goal accomplishment become like a snowball rolling down the hill.
It gains momentum, size, and speed until it’s unstoppable.
Debt repayment changes people inside. It makes them stronger and more adept at facing other changes in their lives.
Financial Independence Retire Early; Know the basics of budgeting and financial management.
Schools don’t generally teach good money management.
It should be.
So, where do people learn to manage their finances?
Television?
The place where at least three times an hour products people don’t need, get rammed down their throats; all while singing the mantra that spending is good because it keeps the economy moving.
Or, are people learning about finance in the home where a good percentage of people in America are in debt and will probably remain there for life? The same typical American family home, where people live paycheck to paycheck and work well into their golden years because the money to retire isn’t there.
The only place to learn financial planning and budgeting is the school of hard knocks. The place where people work diligently to scrape their way out of debt, most of the time living without the basic comforts of the people around them.
The ‘street smarts school’ lays the foundational education about money they should have learned years ago.
An education they should have learned growing up but didn’t.
The pain and hardship they experience living through paying off debt instills these financial lessons deep within their psyche. Experiences are better teachers than any textbooks or lectures in school; a place where most teens are just watching the clock to escape time anyway.
Financial Independence Retire Early; Already has excess money flowing to build a nest egg.
Once the money is flowing, it’s easy to keep it flowing.
As the money train from paying off debt keeps gaining size and speed, it is far easier to channel it into accounts or investment areas for even more substantial compound growth.
People paying off debt don’t miss that money. It’s already been missing from their lives for quite some time. There is no pain to realize; left they’ve done without for so long.
Their pain now turns to joy as they watch what used to be money sliding through their hand now building considerable savings to get them closer to retirement.
Someone starting from zero to build savings needs to experience all that pain now. ‘Zero’ is the beginning of their journey.
People starting at zero still must learn about budgeting and ‘paying yourself first’; well after those lessons were acquired by the people who have paid off debt.
The debt payer’s excess money has momentum, much more momentum.
Financial Independence Retire Early; Has the resilience to solve debt problems.
People who’ve paid off debt proved they have the resilience to solve problems. Look at the willpower and the determination it takes to pay off large-scale debt.
At any time, they could have called it quits and filed bankruptcy or just kept meandering along with the shallow monthly minimums. Minimums are designed to suck every last dollar out of them.
The understanding of money is now very clear to the debt-paying crowd. They know money like it’s their best friend.
They have learned how to use it as a tool.
And, the larger the debt and the less their job gave them to pay down the debt, the better their precession with the tool.
Debt didn’t have a chance once the wheels of the determined debtor started turning.
Financial Independence Retire Early; Has accumulated street smarts to solve life problems.
It takes a certain amount of street smarts to solve some of life’s biggest problems. It’s a better education than most will get out of college.
I’m not against college. I had fun and learned a lot until I dropped out. But, I’m not naive enough to realize a college’s number one goal is to make money.
The second is to educate.
Some of the most inspiring times of my life came from sitting in a lecture.
But, the best education I got in life was grinding it out every day in the working world. I’ve worked hard. I’ve paid off my debt. And, in some aspects, I’ve paid my dues.
I will keep working hard and keep paying dues because that is what street smarts give someone.
Street smarts from paying debt build a certain tenacity to keep pushing for something more.
Just like not letting up I pay the debt, and I won’t let up until I reach financial independence.
It sounds like a crazy path to take. Get yourself deep in debt to get out and retire early.
I’m not saying to put yourself in debt to learn these lessons.
I’m saying these are the lessons debtors have learned and the systems they have put in place which give them a head start on the rest of the FIRE (financial independence retire early) crowd.
What everyone else can do now is take these uncovered lessons and apply them to their own life so everyone can achieve the financially free life they want to live.
It’s not a competition, but a community effort to help everyone build something better for themselves.
Till next time, be safe.
Kevin