Debt and Income
Debt and Income
Having my own podcast gives me the tremendous opportunity to interview people whom I respect and trust without pretense. Paul and I recorded our twenty fifth episode yesterday (we are releasing episode 15 soon) which means that we have interviewed somewhere in the range of 75-100 people. This is exciting. I have learned so much in so little time. There seems to be one message, however, that resonates in almost all the guests we have had on. A message that I frankly never saw coming. Namely, debt and income are not as primary in the path to financial independence as I had previously thought.
There is something more. A more important factor that seems to be the driver of success in financial freedom.
We’ll get to that at the end of the post.
Debt
Of course debt hampers one’s path to financial independence. Especially if you are a couple of professionals with advanced degrees. A two doctor household could have up to a million in educational debt.
This is astounding.
So it would follow that debt repayment would be holding many back. And it is. But not necessarily those pursuing financial freedom. Of the hundred or so people we have interviewed, not one of them suggested that it was an insurmountable hurdle.
Now, obviously, I am interviewing a biased population. Yet it still stunned me that as harsh as debt can be, almost everyone found that once they adapted the right mindset, they found ways to make debt melt away much faster than expected.
Debt and income, apparently not the road blocks that I had expected.
Income
Certainly a high wage or income can propel one to early financial independence. I’m not daft! I get it. There are, however, many who are finding ways to get around this sticky issue. They are cutting expenses to the bone, house hacking, utilizing geoarbitrage, and making it work. Maybe not the easiest of tasks, but it doesn’t seem to be holding any of our guests back.
Conversely, there are many who are making boatloads of money who still end up in the poor house. They may wear the veneer of the wealthy, but they are living in a house of cards. With the most gentle of winds, it can all come tumbling down.
Between debt and income, neither seem to be key in those we have had on the show so far.
Mindset
Mindset is what separates our guests from the crowd. Huge debt or none. High wage or minimum. Those who seem to be successful in pursuing financial freedom and find joy in the journey all share one thing.
They have made a mindset switch. They have looked at the avalanche of excuses (reasonable or not) and have decided that they will find a way around them. It is as simple as that.
Income and debt are only a part of the story. Our guests seem to bend reality to minimize these issues and enhance others. There is an unbreakable belief that the road is treadable. The obstacles surmountable. And that possibilities endless.
It’s all about mindset.
Final Thoughts
I’m not saying that everyone can reach financial independence at a minimum wage. I am not saying that all debts, no matter how big, can be repaid.
What I’m saying is the exact opposite. If you don’t adapt the right mindset than you assure yourself that you are never going to overcome your high debt or low wages.
And this is what I have learned from starting a podcast.
Income and debt. Debt and income.
This reminds me of a couple of sayings I’ve heard:
“You can have results or excuses, you can’t have both”.
“Perspective is everything”.
I find the idea of ‘bending reality’ to be an interesting one. To a degree one’s subjective reality is whatever one wants it to be. Is your reality the same as mine? Is ‘that dress’ blue or white?
The only missing actors in the post are perhaps those who have the mindset to reach FI, yet they find joy elusive in doing so. What to make of the joyless FI?
HH
“joyless FI” is simply the act of trying to use money to solve problems that are not economic.
I think that you’re right. Whether or not one is ignorant to the fact that FI is unlikely to solve the non-economic problem that doesn’t remove the fact that an attempt is being made to use FI to solve the non-economic problem or at the very least better position one’s self to address the non-economic problem.
HH
Inspiration and ideas about mindset are my key motivator to be part of this FI community even though we have already have arrived there with more than enough money for the rest of our lives.
I was just watching a YouTube with Jim Kwik and he described a low point in his life when he described all the things stopping him from reaching his goals. The guy he spoke to raised his two index fingers about a foot apart and said, “You are THIS close”. And then he raised them to his head, saying that it’s all about your thinking. The way you train your mind will determine everything.
What if you train your mind not to have goals?
I didn’t find it about any of those. Debt is a tool. Income is a tool. Spending is a tool. The solution is to use the tools to develop proper positive optimized cash flow. If you go 1M into debt to finance a 15M lifetime income, the debt is a tool and the cost is soon enough overwhelmed by the profit. If you Roth convert you are paying off your government debt (taxes) soonest and therefore paying least but it takes time to break even on the up front cost. In a country with a 300 year history of rising economy it’s likely the bet is a winner. If the government didn’t force RMD you’d be better paying off the taxes when you are dead.
Rather than mindset it’s about devising a plan that has a high probability of success and parsimony, or the least cost for the highest return. I’m not sure why people are so focused on debt. The thing that makers you rich is compounding, and the sooner the better. If you spend ten years paying down a loan of lower percent than you can make compounding for 30 years you’re behind the 8 ball. The other thing is debt has a limited term and tends to be fixed and therefore predictable and as inflation occurs that fixed expense gets paid with cheaper dollars going forward.
Very true. People worry about debt but seem to overcome it.
I’m soooo lucky that I avoided debt in life. I thank my parents
Me too!