Paying off debt while trying to build wealth seems like a tough task to accomplish. But if you want to have a great future, you need to exert enough effort to do both at the same time. It is not as impossible as you may think. It will be difficult, but it can be done.
According to statistics, Americans have a median net worth of $97,300. If you think this is a lot, it is not. A survey revealed that you need to have $2.27 million as your net worth before you can think of yourself as wealthy. Obviously, the average consumer has a long way to go if they really want to build their wealth.
And with the way consumers are struggling with debt, it seems like the task of building wealth becomes a lot harder to do. Instead of using your extra money to increase your income, you have to share it with your debt payments. In fact, there are cases when it makes more sense to prioritize debt payments because of the high interest rates.
So how can you build your wealth and be successful in paying off debt at the same time?
Strategies to build wealth while paying off debt
The good news is, it is possible for you to accomplish both tasks. It will take a lot of sacrifices – but it is doable. You need to be ready to go the extra mile because these two Here are specific strategies that you can use to build wealth while you are paying off debt.
Live a frugal life
If you want to be successful at building your net worth and getting rid of debts, you need to have a lot of extra money from your monthly budget. That means lowering your expenses significantly. You should never allow yourself to overspend because that can make your current financial situation worse. Since you have to accomplish two financial tasks (building wealth and paying off debt), it is not enough that you live within your means. You need to aim for living below your means. This will ensure that you have the extra money to work on improving your financial position. The best way to live below your means is to live a frugal lifestyle.
Being frugal is not just about lowering your expenses. It is about identifying the important expenses so you can focus on these. If the expense is not part of what is important, then you should be able to skip spending on them.
Get realistic but immediate debt relief
If you have to build wealth while you are paying off debt, you must choose the right debt relief option. This option should help you save a lot of money. Start by negotiating a lower interest rate. Then you can also negotiate to waive some of the fees and charges. If the debt relief option can help you improve your credit score, that could make things easier for you to recover. But focusing on saving the most money should be your priority. Any extra money that you get will help finance your plans to build your wealth.
Save for your retirement
One of the best ways to build your wealth is to save for retirement. Unfortunately, not everyone is successful at saving for retirement. At least, several statistics and studies support this. Some of them might be in the same predicament as you. They are unable to save for retirement because of their debt payments. Well if you follow the first two tips, there is a high chance that you can afford to save for the future as well. The key is to start now. It does not matter if it is only a small amount. Even if it is small, it will grow over time. The compound interest will help it grow no matter how small you started.
Why building wealth while paying off debt is important
You might be wondering, why do you need to build your wealth? Wouldn’t it be better to focus on paying down your debts – especially if you mostly have high-interest credit card debts?
It might be more logical to pay down the debt right?
But that really depends on what you want to happen right after you pay off your debts. The truth is, paying off debt completely is one of the most rewarding feelings you can get. However, it could be better. Why not just exert a bit of effort to make sure that debt freedom does not start with zero assets?
Here are specific reasons why you need to build wealth at the same time as you are paying off debt.
You need a strong financial foundation
It is not about being materialistic. But we have to recognize the fact that we live in a consumerist society. We need to pay for things that will make our lives comfortable and convenient. That is why your financial foundation is important. It will help secure your future and ensure that you can withstand any financial problem.
You need to start working on your future
Building wealth will also help you improve your future. Even if you are paying off debt, that does not mean your future has to be put aside. If you want debt relief effects to last, you have to make sure your actions will extend beyond your last debt payment. After all, your debts will be paid off soon. You have to think about what you will be doing when that happens. When you build your wealth, that should be a great starting point to ensure that your financial position only goes up from hereon.