you may have heard that it's impossible to build wealth if you have high interest debt or credit card debt that's not true you can start investing and Building Wealth right now even with highin credit card debt and that's what I'm going to be talking about in today's show so today I am going to be taking you on a deep dive into the spreadsheets behind the numbers with all the charts just showing you how you can in fact use your money to build wealth even while you may still be working on paying down credit card debt so even while you still have credit card debt one of the best decisions that you can ever make is to commit to investing some of your money every single month so that it can grow into a nest egg that will support you when you're ready to stop working or when you're no longer able to work so you can live abundantly even after you decide that you want to stop working or cut back on your working hours and yet so many people delay getting started investing delay getting started with those building those habits that they need in order to create that financially abundant future the Financial Freedom that they're seeking they delay it because they think that it's impossible for them to do it unless they've paid off their debt first and that's not true now I made a whole video last week all about how paying off debt doesn't build well so you should definitely check that one out as a primer to this video before we dive into into the video I want you to know that we are just a few days away from the live investing Workshop that I am going to be teaching and I want to invite you to join me for the workshop it's called investing made simple and I am going to teach you a stepbystep investing strategy that you can Implement on autopilot and build your million dooll to multi-million doll nest egg in the workshop you're going to learn the investment lingo you're going to understand how investing Works how you can put together a solid investing strategy that can support your big life and financial goals and when you join the workshop you're also going to get lifetime access to the replay and the workbook so you can revisit it over and over and over as the years pass and you're tweaking your investing strategy knowing what you're investing in and why is essential for every single person you don't want to be Outsourcing this to a partner or Outsourcing this to a financial advisor before you yourself fully understand your investing strategy and how it fits into your overall holistic wealth plan so head on over to one bhappy life.com slork and save your seat now maybe you're thinking well I'm not ready to start investing yet because I have to hit these other goals like paying off my debt well that's what this video is all about but I'm going to tell you that that is not true so do not wait go ahead and and save your seat one bigapp life.com slork so let's look at this idea of high interest debt stopping you from Building Wealth and I've got the numbers I've got the charts got the spreadsheets but the first thing that I want to do is just share a an analogy with you so I want you to imagine that you are having a pizza party and you're having friends come over and your friends tell you how much pizza they're going to eat right so you've got four friends coming over it's like eight slices of pizza and you know some of your friends want three slices and some of them want two slices and so you realize well of those eight slices of pizza between you and your friends there's there's enough for everyone to have their own slice of pizza so I want you to think of your money as the pizza and so when you have this pizza it can be divided to hit different financial goals you can give two slices of pizza to B Bob you can give two slices of pizza to Jill and the fact that Bob is eating two slices of pizza does not stop Jill from eating the two slices of pizza that she needs in order to be full your money works exactly the same way you can divide one section of Your Pie Pizza Pie money pie to go towards debt and then you can also have a section of the pie going towards building your wealth because at the end of the day you have a Financial Freedom number you should have it you should know what that number is that number is the number and what it takes to get to that number is exactly the same that's your minimum savings rate so the amount that you need to be investing each month in order to hit your Financial Freedom number once you hit that number once you're hitting your minimum savings rate month after month after month it does not matter what you are doing with the rest of your Pi you can choose to put some of that Pi towards debt you can choose to put some of that pie towards lifestyle spending travel buying a house doing whatever you want with the money but what we often see when it comes to talking about investing versus paying off debt is this idea that your money can either do one thing or the other and so any pizza that goes to debt can't go to investing not realizing that it's actually possible to have two slices of pizza go to your investing and your investing will be full and it doesn't need any more pizza so that's the premise that we're working off here that your money is capable of working towards multiple financial goals and that you have enough Pizza to go around if you don't have enough Pizza to go around at your pizza party what do you do you go out and get more pizza right so that is also why it's so important that you see your investing as something that you don't put off because you want to make sure that you are holding a slice of pizza that is the proper size for your Investments okay so now that I have stretched this analogy out super far let's look at how this plays out and I'm going to show you three different scenarios so the first scenario I'm going to show you is the windfall scenario so to calculate the numbers here I used an amortization schedule which means that I calculated what your credit card payments would be over time assuming a 30% interest rate $20,000 in credit card debt and that you pay pay 2% of your credit card principal every month and that the interest compounds every month every day which is what happens with credit cards you have daily interest compounding similarly on the investment side I calculated how much your Investments would grow month after month after month assuming a certain amount of money put into your to your Investments which varies depending on which scenario we're using so we'll chat about that as we go through each scenario but also using the past market performance of the stock market at 10% and so with these calculations there is some amount of speculation because we're not dealing with a real life scenario so I don't have someone's real income sitting in front of me I don't have their real debt load sitting in front of me so I have to make some assumptions and we'll talk a little bit more about the assumptions as we're going through the scenarios scenario one I call the windfall so you have $220,000 worth of debt and you have $220,000 in your bank account let's say someone gave you $220,000 and so you're trying to decide what should you do with that money should you pay off your high interest debt or should you go ahead and invest that money now some people would say well you should pay off your high interest debt because it's impossible for you to build wealth while you're still paying off that debt but remember the pizza analogy right so some of your income right now one slice of pizza is going towards paying off your debt now you have this other slice of pizza maybe even a whole pie that can go towards investing which is that $20,000 so as you can see right here just looking at this chart when you use some of your pizza to invest so you invest the $20,000 lump sum right at the beginning and then you sloway your credit card over time you can see just from the lines the red line is your assets and your Investments increasing the blue line is your interest rate decreasing and so remember here what we are looking at is can you build wealth even while you still have high interest debt and the answer is yes because it takes a little less than 20 years to completely retire that debt but at the end of that time you will have over $140,000 from choosing to invest that 20,000 instead of paying off your debt and so now you might be thinking well I could just pay off that debt and then like find the money to then start investing and that's true but what you'd be doing doing is paying off your $20,000 worth of debt to save yourself $23,000 in interest but the cost is the $140,000 that that $220,000 would have grown into so you're saving yourself $20,000 at the cost of $140,000 now why I like this scenario is that it is truly perfectly one snapshot in time so you have the $20,000 and you can use it in either way and so then you can look and see well I can pay off debt with this $20,000 and you know that if you pay off this debt you'll save yourself the interest that you would have paid which is$ 23,000 you also know that if you invest it could have grown to 140,000 and so that really is just this great snapshot comparison that shows you the financial options between your decisions and so again it also really illustrates that you can 100% increase your wealth invest for wealth and also still have a 30% interest rate credit card debt now let's move into scenario two so scenario two I am calling the slow pay because I'm assuming that you don't have $20,000 to pay off your credit card debt and so you're just going to make the minimum payments on your credit cards but you are going to put to start $500 towards your investing and so as your minimum payment on your credit card decreases which it will do because you're paying off principal month after month after month that extra money you're going to put towards your Investments right so the total amount of pizza doesn't change it's just the ratios that change over time and so you can see that while you start out negative right because you just have this $20,000 worth of debt and you don't have any assets so you can start out negative the blue line is higher than the red line over time the Red Line surpasses the blue line and gets really high right it gets up to over $800,000 and again we're just talking about the same couple of slices of pizza and so again the point is here for you to see that you don't have to aggressively pay down your debt to build wealth you can build wealth even while you are slow paying high interest debt now we're going to dive into scenario number three which is actually the perfect Financial optimization scenario which is which has you fast paying your high interest debt and then putting the money towards your assets and so you can see you start out with the blue up top the blue quickly comes down you pay off that $220,000 within 2 years and then your red shoots up now the thing that I want you to notice is that the final outcome here is actually not that much different between scenario 2 and scenario 3 scenario 3 is the from a pure number standpoint the numerically optimal thing to do right if you manage your finances perfectly if you make sure that you after you're done paying off that debt that all of that money does go to your savings and you build a perfect savings habit and nothing happens life doesn't get in the way then you will end up with an extra 20 something, at the end of 20 years and this is 100% true the problem with this perfect pay scenario is that we're not perfect life happens life is going to happen so to plan for a scenario where we act perfectly especially if we don't have any history of acting perfectly in the past is honestly setting ourselves up for a bit of failure this is especially true when we approach our finances from the perspective of our investments or something that we get to after we hit other Financial priorities so after we've paid off debt and let's say life happens you've paid off your credit card you finally start to invest now you need a car and you end up having a car payment well you've got to pay that off and oh my gosh there was a hurricane and you have a major flood in your house and you had to use credit card debt to repair that well when do you do you stop investing and do you then go back to paying off that credit card debt so that's just something to keep in mind it's like why not just start now why not just commit to investing your money for your future self no matter what because at some point you will have to make that commitment so why not now the other thing with the perfect pay is that it's actually less flexible because when you have debt a lot of people say well having debt is risky but risky how exactly especially when we're talking about credit card debt when you have credit card debt which is an unsecured debt it's not tied to any particular asset is very challenging for your creditor to actually be able to collect so what you have is a situation of shared risk where both you and your lender are sharing the risk that you might not be able to pay when you pay off that credit card debt you carry all of the risk you also lose your flexibility because you had this shared risk this pool of debt that could be restructured in many different ways but now it's gone and now you're only left with your your own Financial Resources so you actually reduce your flexibility you reduce your options when you choose to focus on putting all of your assets outside of your financial house right giving all of your assets away before you start investing and keeping some of your assets for yourself the other thing to keep in mind is inflation which is that today's dollars are the most valuable dollars you will ever have not future dollars and when you choose to pay off your debt with today's dollars you're actually putting your most valuable asset in other people's pockets instead of your own and especially when you think of the timing of the transactions and when you will actually start saving money you're looking at the tail end of this transaction so 20 years from now $20,000 is is not worth $20,000 in today's dollars 20 years from now it's actually less valuable dollars so you want your most powerful dollars your today dollars working for you right now and then you can pay that other stuff with less valuable dollars in the future and you can really see that tradeoff happening in the very first scenario where we have $20,000 in cash right now and a $20,000 debt and when we put that money in Investments you end up with a hundred plus thousand more dollars because of the value of present dollars versus waiting to use future dollars to save now the last thing I'm going to talk about and I know I packed a lot in this video but I'm trying to squeeze in as much as possible so there may be a conversation around well there's no guarantee of future returns and that's true but understand we're going to circle back to this idea that your Financial Freedom number is your Financial Freedom number it is not going to change and so Building Wealth asset accumulation is a function of money plus time plus return your time is fixed you don't get any more time it's set your return is also set because the Market's going to do what the Market's going to do we just don't know what the Market's going to do yet we have past performance but we don't know what it's going to do in the future so if the if you don't have any more time and if the return goes down as some people might want to say that the return will go down in the future then you are going to need even more money that's the only other part of the equation that you can touch so I want you to really think about that if you truly expect that the returns will be even lower in the future that means you need to pile even more of your most powerful asset your present dollars into hitting your Financial Freedom number because at the end of the day you can always figure out ways to restructure more your debt you can always figure out ways to honestly even lower the interest rate on your credit card over time but you're not going to be able to finance your future Financial Independence you have to self finance that you have to have the assets to support it and it is going to take you decades so you might as well start now and join me at the live investing Workshop in just a few days so that you can make sure that you're investing in a way that's as powerful and effective as possible because you know exactly what you're doing with your money so head on over to one bhappy life.com workshop and I will see you there all right see you in the next video [Music]
