The Most Important Step Toward Financial Freedom Is One You Wouldn’t Expect

Jan 22, 2021


If you’re anything like me, just reading that word can trigger anxiety. As I told you last week, I struggled with the shame, worry, and fear of too much debt for years.

But I can also tell you that paying down that debt was the most important step I took toward a brighter financial future.

It didn’t matter how great my jobs were early in my career. It didn’t matter how much money I made year after year.

And the bonuses I received? They didn’t matter, either.

It was all spent. I did nothing productive with this money.

But here’s the most important thing to know about debt …

When you owe a lot of money, YOU are someone else’s investment. And they are often making a killing off of you.

So, if you’re looking for the best investment you can make in yourself?

It’s going to be avoiding falling into debt in the first place… or paying it down quickly if you already have.

So today, I want to tell you how I did it… and share some of the lessons I learned to help you do the same.

For me, it all started with the “M” word. No, not money… but mindset.

You see, my wife and I had “tried” to pay down our debt before. But it wasn’t until we decided to make paying down our debt our No. 1 financial priority that everything changed.

The mindset shift became everything…

First, we defined what we REALLY wanted in life.

And everything came back to financial freedom. That’s the freedom to do what you want, when you want, where you want.

We realized we didn’t need much. We didn’t need big boats and super fancy cars.

What we needed was simply a worry-free retirement.

We defined what that looked like. No debt… a house we loved… vacations… and hopefully, one day, the ability to spoil our grandkids!

To be honest with you, we don’t need much. But we realized we couldn’t accomplish any of that if we were still in debt at retirement.

So, we created a handful of simple rules for ourselves, and then committed to following them until we had achieved our goal, no matter what.

First, we decided we would stop trying to invest until we had some breathing room.

Now, you might be surprised to read that from the CEO of an investment software company like TradeSmith.

But if you’re carrying a lot of debt — particularly high-interest-rate debt — like we were, you’re likely to lose far more in interest each year than you could realistically hope to consistently earn from your investments.

In most cases, you’ll get a far better return on your money if you pay down your debt before you start investing. (I’d also suggest building up at least a few months’ worth of expenses before investing, too. That way you won’t fall back into debt due to an unexpected expense or emergency.)

So that’s what we did.

We committed to using most of our paychecks (and any work bonuses or other unexpected sources of income) to paying down our debt, starting with the highest interest rate debt first.

We also devoted a small portion of our paychecks to build up our emergency fund. And even a little bit to build up an annual vacation fund. (More on this in a moment.)

Next, we committed to lowering our expenses. But probably not in the way you would think.

Contrary to the advice of many financial “gurus,” we didn’t follow a budget.

That’s right… We paid off a staggering amount of debt in just a few years, and we didn’t follow a traditional budget at all.

Why? Because for most people, budgets simply don’t work.

I’m great at math. I’m a whiz with a spreadsheet. But I tried to follow a budget for my whole damn life and it never worked.

No matter how hard I tried, I just couldn’t stick with it.

It’s hard to think about the future when you can’t even stay within budget the first month you try. That’s probably why almost everyone falls flat after spending hours creating a budget.

So, this time, we tried something different.

We sat down and made a list of all of our expenses. This included “essentials” like our mortgage, utilities, childcare, and food, as well as “discretionary” things like eating at restaurants, going to the movies, vacations, etc.

We then made a simple rule that for us to spend money on a non-essential item, it had to be something that we loved… something that truly brought us joy.

What we found surprised us…

It turned out that many of the things we bought didn’t make us happy… and many of the things that really brought us joy didn’t cost much at all.

For instance, spending time with friends is one of our greatest joys — and doing that over a home-cooked meal is great and memorable and relatively inexpensive.

And for those things that did cost more — like vacations — we were able to save a great deal by focusing on “bang for the buck” type trips and planning well in advance.

Of course, depending on your current income and debt levels, you may find you need to generate more money. You may need to seek out a better-paying job, some part-time work, or a “side hustle” of some sort.

I’ve always worked harder and harder to generate more income. There’s no roundabout way to do this. If you need more money, you have to go earn it!

But the key here is to take an honest look at what you’re actually spending your money on. If you do, there’s a good chance you’ll find at least a few things you don’t really need and you don’t particularly enjoy.

We did. And we quickly realized we didn’t have to starve ourselves of enjoyment to save money.

We just figured out what we really enjoyed — what was really worth spending money on and what wasn’t — and saved the rest.

This allowed us to make progress faster than we originally believed possible, and we didn’t feel like we were making a huge sacrifice to do it.

The last thing we did might sound a little silly, but it’s really important.

When you have as much debt as we did, it’s likely going to take you a few years to pay it all off. There’s simply no way around it. So, you have to find ways to stay inspired and motivated.

For us, this meant bragging to ourselves a LOT when we were paying down debt. We celebrated our progress every chance we got.

We also spent a lot of time dreaming about the future. As I mentioned earlier, we really focused on what we wanted our future to look like, and we realized the most important thing was to be financially free in retirement.

We wanted the freedom to explore, to go out, to do things with family and friends… not a mountain of debt with nothing to show for it.

We reminded ourselves again and again that we didn’t really want extravagant things… what we really wanted was to feel good and not be stressed about money.

Celebrating the small wins and keeping our focus on the future made the entire journey a lot easier, and sometimes even fun.

If you or someone you love is currently struggling with debt, I hope you’ll give these simple ideas a try. They made a huge difference in my life and I’m confident they can do the same for you.