In my opinion 90% of today’s personal finance teachings fail to tell the consumer how to truly prepare for their financial future because of these words: “debt-free.” So many financial websites seem intent on focusing on how much they have paid off or how they have reduced their debt. While there are some websites such as Afford Anything, Mr. Money Mustache, BiggerPockets, and of course mine that talk about investing and growing for the future, it seems like this is an anomaly rather than the norm.
While it is true that debt can be bad, it can also be wonderful. My husband and I are 1.1 million dollars in debt and are PROUD of our success. Our success also generates $2,000 in monthly cash flow and almost that much in principle.
We are not worried about our debt number, but more about our net worth. Our net worth is the number that illustrates our value after all our debt is paid off and we are finally debt-free. We have strategically placed ourselves into debt with profitable rentals that fit very stringent parameters. The end goal is to create the required cash flow to fund our dream goal in 15 years. We are in this for the long run.
The key for us is not about paying off our debt (which is an eventual goal), but setting up a platform to retire and grow off of. We have invested over $135,000 in our rentals over the past four years. Right now we have about $40,000k in debt between a 0% car loan and a 0% American Express card. If we had put our money into being debt-free we would have $95,000 in the bank right now instead of $400,000 in net worth.
While our frugal practices have been imperative, such as saving $1,000 a month on our housing expenses or living off of one income, it has only been a tool. Using short sales and foreclosures to put significant sweat equity into buying houses under market value has also done tremendous things in growing our net worth.
We bought two houses this past May. One for $20,000 and the other one for $45,000. So for a total of $65,000 in cash we gained $80,000 in equity through buying a short sale and foreclosure. The houses will bring in over $850 a month in cash flow not including principle pay down or appreciation.
If we were not such believers in debt, leverage, and growing our money aggressively, then there is no way we could get to this point by the ages of 27 and 28. So while I totally agree with Dave Ramsey and many other great financial gurus when it comes to getting out of debt, I also believe: You cannot forget about investing, growing, and having your money work HARDER than you at growing!!
What is your strategy?
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