Time is of the Essence - Why Getting Out of Debt Fast is Your First Step Towards Making Millions
If you’ve been following our blog posts so far, you already know that following the Destiny App’s customized debt repayment plan will not only save you thousands of dollars, but it will also enable you to pay off your debt as quickly as possible.
Living a debt-free life before the age of 50 sounds pretty great in theory, but maybe you’re not yet convinced; maybe sticking to those minimum payments is worth it to you if it means keeping more money from this month’s paycheck (...even if it does mean paying an extra $30k when all is said and done)!
But what if becoming debt free is about more than simply skating by? We hope to empower you to take this journey one step further, and show you how getting out of debt fast is a crucial first step towards building wealth, and can even give you - no matter who you are - the opportunity to retire a millionaire.
Don’t believe us? Let’s break down the math.
To build on our previous example, let’s pretend you graduated with $36,000 in student loan debt with a 5% interest rate.
First, let’s pretend you made a minimum payment (say $200) for the lifetime of the loan. This means you will pay off your loan in 27 years and pay an additional $30,680 in interest alone. Assuming you started this process at age 22, you’ll be debt free at age 49 and have paid $66,680 total in student loan debt - almost double what you originally borrowed!
That sounds pretty terrible. But what if we use an alternate strategy and make that compound interest work for us?
What happens if we use these strategies and find a way to make $500 payments each month (instead of the minimum $200) until we’re debt free... and then continue those good habits and invest the rest?
First of all, you would have your loan paid off in only 7 years after paying only $6,890 in interest.
But let’s take it a step further:
For the next 20 years (during which you otherwise would have continued making minimum payments), continue those good habits and invest that same $500/month in low-cost index funds through your 401(k), 403(b), IRA, or any other tax-advantaged account.
Assuming the historical average annual return of 8%, your wealth would grow to $298,868!
Instead of continuously paying someone else for 27 years and just now getting out of debt, you spent 20 years paying yourself and are well on your way to becoming a millionaire!
Still don’t believe us?
Continue that exact same $500/month investing habit for another 20 years, and should have over $1.6 million in your 60s - just in time to live out your dream retirement.
Now that’s the power of compound interest!
No matter what age you are now, what your total debt picture is, or what your income is - the concept is the same. The more committed you are to paying off your debt now, the more opportunity you have to completely turn your life around and become wealthy.
That’s why we want to help you get out of debt as quickly as possible so that you can stop paying interest to others (whether it be student loans, fancy car loans, or credit card payments), and start paying yourself.
If you’re serious about pursuing your debt-free journey, chances are you’ve already started building good habits and using these tips to help you afford those extra payments. No matter your income, you won’t believe the doors that open when you continue those habits and watch that interest start to work for you!
Still think you might need a little help figuring all of this out, or even a little accountability? We created an app that solves this entire process for you and more → check us out on iOS or Android!