less than zero
Some thoughts of note regarding my current financial situation:
I may be making good progress towards paying off old debt and moving towards saving for my house, but I still only have about $100 in my checking account to last me for almost the next two weeks, since I am using my money to pay my obligations aggressively.
The thing to remember here is that although my net worth has increased $10,000, I am no more wealthy than before. Less than zero is still less than zero, even though the deficit might be smaller. I don’t say this to be depressing, I’m just trying to keep it real. Debt repayment does not build wealth because it does not increase assets. That $10,000 I put on debt (actually thousands more, because interest cut into some of my progress as I was making payments) hasn’t added to my assets at all. In fact, I have less money now than I did when I started this journey.
Debt repayment is like a primer coat when you’re painting a wall. It’s preparation for the real deal. So, to frame my accomplishment in the proper perspective, I have made really good progress putting primer on my wall so far. As I add assets with savings and retirement, I’ll add color to my wall (something bright, like yellow, because this part of my journey will be the most fulfilling). I can paint my wall in color by adding assets as much as I want… but it’s not going to look satisfactory to me unless my wall is totally primed and the debt is all gone. Don’t get me wrong, I think savings and retirement are serious priorities which are not to be ignored or postponed. But debt that accrues interest will always literally be a liability until I get rid of it.
Mentally, the key for me is to balance my perspective. I have to balance optimism regarding my progress with realism that recognizes that I still have a long way to go to get out of debt and build assets that will place me in a good position to retire one day and provide well for myself and a family. Without balance, I might lose focus on what’s important, or get lazy about improving my financial situation.
I say always do what works best for you. Take financial advice from everyone with a grain of salt. Savings, investing, getting out of debt. Some do all at once and some one at a time.
Slow and steady always wins the race!
Thanks!
Comment by Moneymonk — October 29, 2007 @ 12:28 pm
It is less than zero, but consider it as a strange kind of investment as well. I’ve heard people say that paying off debt has a guaranteed return–of not paying out interest.
I like your analogy of primer and paint. Fortunately, you can paint a bit of the wall even as you’re priming the rest. Congrats on making it this far!
That’s exactly what I’m hoping to do - put some paint over here, put some primer over there. Thanks!
Comment by Mrs. Micah — October 29, 2007 @ 4:55 pm