Should I pay off all my debt?

[MJ DeMarco]

I really like the idea of not owing anyone a dime

And let me tell you, the feeling is priceless.

WWMJDD?

I would attack your non-essential debts: That is your car note and your student loans. However I would not use your retirement accounts for this purpose, nor would I go cash broke either-- I just would make these debts a priority, followed by your business.

As for the real estate, this sounds like an asset that is working for you at the moment, so the debt there has a purpose.

As always, this is my opinion and not a professional, tax, legal, or financial advice -- its WWMJDD? LOL.

And finally, congrats on making progress and having a success story unfolding and on the horizon.

 

[biophase]

After reading through this whole thing I have two opinions:

1) You mention that you like to use the cashflow. I am getting a tiny feeling that you maybe don't budget or spend when you have money. Therefore, I wonder if going debt free will increase your spending habits. What good is freeing up an extra $500/mo if you end up spending it on fancy dinners.

2) I would sell my rental and pay off the house and student loans. Having a free and clear home feels awesome. It relieves alot of stress because you will always have a home with little ongoing costs. You can afford to make business mistakes and still survive and bounce back this way.

If you did not pay off debt and make a bad business decision and lose a tenant, your whole empire could crumble into nothing.

 

[OldFaithful]

I agree with @Mikkel and @UnrealCreative...pay off all debt ASAP. That's just my opinion though and I'll try to explain why.

It appears that you aren't content with your current business, as your goals must have changed recently. (Perhaps from having read TMF ???) So you are likely in for a change in work/business sometime in your near future. As has been mentioned, many ventures fail, and if you go thru a period of reduced income...your debt will be unsustainable. You might lose your home or have to cash in all of your tax deferred savings, ouch!

As a family man, you probably want to guard them against the possibility of losing the homestead. If you have no debt and your next business fails, you can adjust your standard of living down to match the income. If all debt is gone, none of your monthly costs are fixed. You can adjust. That is the freedom that being debt free offers you.

You've reduced your risk in one area and now allowed yourself to take greater risks in another...the new business.

 

[minirich]

Interesting thought process. If I were to invest in my current business any further it would have to be in a solid way that would create a Fastlane vehicle for me.

Fastlane is a minde set. Any Fastlane business starts as "Not a Fastlane business". It is in the process , not an event of getting there.
If you sell and payoff at once, you are acting on events.

If you have no experience in coding and you already have a business, do not change your course.
Its like you have a flywheel (your business) which is running and slowly taking up speed and than you throw in the reverse or start a second flywheel (learning to code) what will happen, either your already running flywheel will go hopping of its mounting, or it will slow down while you push the other flywheel. And in sum your flywheels will turn slower/take longer to get to speed again, in boths ways.

But in the end I/we cannot make your decisions: https://thefastlaneforum.com/community/link-forums/should-i-enter-huge-decision-here.139/

 

[Guest34764]

It's easier paying it off when you're in an advantageous position to do so.

Trying to pay off debt while in a disadvantageous position could really mess you up.

I say play it safely, climb to a position where the debt doesn't seem as big as it does now, and pay it off.

Don't completely (obviously) invest all the money for a business, but make sure you're using enough to properly nurture a business.

I've never been in debt (16, woo!) but I'm sure it's very liberating to have those shackles off you , just don't rip them off too fast or your arms will come off with them!

p.s. someone correct me if I'm wrong here please, It's a good learning experience for me.

 

[Mikkel]

Ultimately the decision is up to you.

Personally, I would pay off all my debt first, if that is possible, as this seems the case for you. You are basically guaranteed to save/make(which every view point you choose to have) a good deal of money just by paying off your debt.

Success in this field takes a good amount of failures before you succeed.

Some people will disagree with me on this point, maybe? However, if you fail at your first business and loose your 6 figure savings, you're going to be hurting pretty bad. You may even be handicapped from trying again since you still have that overwhelming debt that you can no longer pay off.

Learn from the form. Get real clear on how you are going to execute your plan. In the mean time, save up some money for your business plan while not having to pay off debt... because you're debt free.

My two cents

 

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[miked_d]

This may not be a popular opinion but I would focus on the student loan debt. Why? It cannot be discharged in a bankruptcy. It doesn't appear that would be an issue for you so may not be relevant.

Is the rental cash flow positive? I think that is the term. If you are making money from the rental why would you sell it?

 

[lowtek]

*edit*

I read the entire thread after posting.

Your situation sounds like a mess, pay off the debt first.

 

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[Get Right]

First, welcome to the forum! I like the research that you have already done into the situation. The forum is packed with little nuggets of wealth you can use.

A few things stood out to me:

First was your level of contentment. Not sure I would mess with that a whole lot!

Second was the desire/need to be either 100% debt free or plow the money into something else. I would encourage you see why you feel that way. You have a lot more options. For instance you could just pay a few thousand per month off of the debt and have it gone in a reasonable time period without wiping out a big chunk of change. You could also start a little side project with the intent of it solely paying off debt (kind of making it a game).

Third, I would encourage you to play the game Cashflow. You can run through many, many different debt/income scenarios in a short amount of time. Based on advice form a previous forum participant, I would use his "play it at least 10 times" rule.

Good luck and let us know what you decide!

 

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[TonyStark]

You can't fly with a ball & chain tied to your foot.

 

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[TKDTyler]

I'm in a similar position with 100k+ in student loans looming over my head. I have around 20-30k floating per year but I found that it is better invested in trying to grow my fast lane business.

I chose ecommerce and it's quite capital intensive. Does your vehicle require capital? If so, does the capital that you put into your business create a greater ROI than the interest you pay on your loans? My highest loan is 6.5% but the margins on my products are 20-30%. Makes more sense to invest in capital to grow my system.

Depending on those questions, you should have your answer. There is always a way to hustle with and without capital. Define your vehicle first and then it will easier to answer that question.

Do not let personal debt scare you and prevent you from taking action. Action is the only way to get yourself out of the hole.

 

[EvanOkanagan]

How much positive cash flow is your rental Making? (after mtg, taxes, and insurance). AND How much is owed on the rental?

What % interest rate is your student loan, and what is your overall payment with your car and student loan combined?

Would love to help, these are important questions though

 

[GuestUser4aMPs1]

The question shouldn't be "Should I pay it off" but rather "How soon?"

In that case, as soon as possible.

Also,
https://www.thefastlaneforum.com/co...-cant-make-your-life-decisions-for-you.33485/

 

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[Perrots]

Almost done with the TMFL and I feel my eyes have been opened to a whole new way of thinking. Thank you @MJ DeMarco for writing your book.

Here's a rundown of my situation.

- We have two mortgages. (One rental property and one owner occupied)
- About 57k in student loan debt
- Around 7k car note
- No revolving credit card debt (pay off entire balance each month)
- A little over six figure savings in various accounts (401k's, IRA's, Savings, etc)

Wife works a 9 to 5 job and I own my own small business.

The value of my rental property seems to be on the rise. I'm possibly in a position that if I sold my rental, I could profit just enough to pay off all of our debt, which includes our current residence, the student loans and the care note.

100% debt free by age 36.

My question is, should I? Or would it be wiser to use that money and grow it using a Fastlane vehicle? I really like the idea of not owing anyone a dime. We would still need to keep working for now, but being debt free just sounds so liberating.

I could use the extra monthly income to invest in myself. I've been considering learning how to code and create a content delivery system that can Fastlane me to the land of milk and honey. Or find a way to convert my business into a Fastlane vehicle.

Any thoughts?

WWMJDD? (What would @MJ DeMarco do?)

If its just you and your wife maybe you should keep the rental property sell your current home and move into a condo or something cheaper and use that to pay off your debts. Rental property is a great asset to have. But honestly you have to discuss and make this decision with your wife. Also you shouldnt ask what would MJ do because youre in different situations, youre different people.

 

[tonyf7]

I agree with @Mikkel and @UnrealCreative...pay off all debt ASAP. That's just my opinion though and I'll try to explain why.

It appears that you aren't content with your current business, as your goals must have changed recently. (Perhaps from having read TMF ???) So you are likely in for a change in work/business sometime in your near future. As has been mentioned, many ventures fail, and if you go thru a period of reduced income...your debt will be unsustainable. You might lose your home or have to cash in all of your tax deferred savings, ouch!

As a family man, you probably want to guard them against the possibility of losing the homestead. If you have no debt and your next business fails, you can adjust your standard of living down to match the income. If all debt is gone, none of your monthly costs are fixed. You can adjust. That is the freedom that being debt free offers you.

You've reduced your risk in one area and now allowed yourself to take greater risks in another...the new business.

Wow! This really puts it into another perspective. That's why another set of eyes and ears is always helpful. You're also pretty perceptive (are you also a family man?).

You're partly right about the business. Reading TMF totally changed my perception about my own business and how so far I've only created another job for myself. But contrary to your statement above, I do feel content. I like what I do and I enjoy it. But I also realize now that I've read MJ's book, that it's not Fastlane, and ultimately my goal is to not need a job anymore.

My business is actually starting to grow as word of mouth spreads in this small town we live in. We've really set up a good reputation for ourselves and things are looking up. I'm not making a killing yet but it pays the bills. The most rewarding aspect of my business is the learning process. Learning how to start and grow a business with nothing but a GED to my name has been fun. Meeting new people everyday is fun too. And best of all I love making my own schedule. I get to drop and pick my kids up from school everyday. Something we couldn't do when we lived in the big city.

So you're totally spot on when you pointed out that by eliminating all my debt I get to protect my family. It's like a safety net. Knowing that we're debt free and that my family will always have a roof over their head allows me to take more risks on the business side and will also allow us to bounce back faster and easier should the proverbial shit hit the fan.

I wasn't consciously thinking about it this way but when I read what you wrote it clicked.

 

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[townhaus]

Unless you are generating higher returns on the savings / investment accounts, then you should use that cash to pay off the debt.

We are all expecting to become millionaires here, but reality is many of us won't achieve it. Don't assume that your going to be able to generate 10x return using those savings on your next venture.

Do you have good credit? If so then you could borrow the cash later when needed.

You are basically paying out monthly interest to keep your savings and investment accounts topped up, (unless they're making very good returns).

 

[G-Man]

I agree with @Mikkel and @UnrealCreative...pay off all debt ASAP. That's just my opinion though and I'll try to explain why.

It appears that you aren't content with your current business, as your goals must have changed recently. (Perhaps from having read TMF ???) So you are likely in for a change in work/business sometime in your near future. As has been mentioned, many ventures fail, and if you go thru a period of reduced income...your debt will be unsustainable. You might lose your home or have to cash in all of your tax deferred savings, ouch!

As a family man, you probably want to guard them against the possibility of losing the homestead. If you have no debt and your next business fails, you can adjust your standard of living down to match the income. If all debt is gone, none of your monthly costs are fixed. You can adjust. That is the freedom that being debt free offers you.

You've reduced your risk in one area and now allowed yourself to take greater risks in another...the new business.

Have to agree with faithful here. I understand the math side of it, If you're earning more on your money than you're paying in vig, etc, etc. Totally logical.

Problem is the human nature side of it. We're not logical. You'll have ups and downs, and there's nothing more irrational than a guy that's in a downswing making decisions driven by the fact that he has an enormous nut to make every month. Maybe you're a jedi who's immune to fits of irrationality caused by stress. I don't know.

Possible exception to this would be the rental property. Also agree with someone above who said target student loan first. Anything that even a judge can't let you walk away from... you don't want that in your life.

I'm extremely conservative by nature, so feel free to grain of salt all of the above.

 

[GMSI7D]

Having a lot of debt, especially student loan is relatively unknown in Europe compared to you american guys.

yes i live in a socialist country when looking at facts and not really in a capitalist one.

so i haven't had any debt or loan of any kind in my life and thus i can't really understand the feeling that MJ DeMarco is talking about a few post above mine.

so as a reply, i would say that you shoud never have debt or loan of any kind in your life.

 

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[tonyf7]

Having a lot of debt, especially student loan is relatively unknown in Europe compared to you american guys.

yes i live in a socialist country when looking at facts and not really in a capitalist one.

so i haven't had any debt or loan of any kind in my life and thus i can't really understand the feeling that MJ DeMarco is talking about a few post above mine.

so as a reply, i would say that you shoud never have debt or loan of any kind in your life.

You Europeans are so spoiled with your debtless educational system. Haha. Just kidding.

I agree.

Debt should be the 8th deadly sin and avoided like the plague.

Sent from my SM-G935V using Tapatalk

 

[GMSI7D]

You Europeans are so spoiled with your debtless educational system. Haha. Just kidding.

I agree.

Debt should be the 8th deadly sin and avoided like the plague.

Sent from my SM-G935V using Tapatalk

in fact, our educational system is trash so i don't know whether we are lucky or not

maybe not .




don't forget that you guys have more freedom than we have in France.

i won't tell the details because everyone can see what we are saying on the internet, but trust me on this one.

if freedom means anything at all then you are in the right place in the USA

not me.

 

[tonyf7]

Almost done with the TMFL and I feel my eyes have been opened to a whole new way of thinking. Thank you @MJ DeMarco for writing your book.

Here's a rundown of my situation.

- We have two mortgages. (One rental property and one owner occupied)
- About 57k in student loan debt
- Around 7k car note
- No revolving credit card debt (pay off entire balance each month)
- A little over six figure savings in various accounts (401k's, IRA's, Savings, etc)

Wife works a 9 to 5 job and I own my own small business.

The value of my rental property seems to be on the rise. I'm possibly in a position that if I sold my rental, I could profit just enough to pay off all of our debt, which includes our current residence, the student loans and the care note.

100% debt free by age 36.

My question is, should I? Or would it be wiser to use that money and grow it using a Fastlane vehicle? I really like the idea of not owing anyone a dime. We would still need to keep working for now, but being debt free just sounds so liberating.

I could use the extra monthly income to invest in myself. I've been considering learning how to code and create a content delivery system that can Fastlane me to the land of milk and honey. Or find a way to convert my business into a Fastlane vehicle.

Any thoughts?

WWMJDD? (What would @MJ DeMarco do?)

 

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[AustinS28]

Im in a similar boat with student loan debt hanging over my head. You have more investments than me.

Just wanted to chime in though regarding learning to code. With websites like code academy and udemy - if very internally motivated - it shouldn't take a huge investment to learn and become proficient.

I've been at it for a few months. It's been enjoyable. Taking some code academy courses will also allow you to figure out if it's something for you without laying out a dime.

I do plan on going to a coding boot camp next year which isn't cheap, but think it'll be worth it. You'll need to know a good amount of material before you can crush an interview for a code school anyways so I'd start there.

 

[tonyf7]

This may not be a popular opinion but I would focus on the student loan debt. Why? It cannot be discharged in a bankruptcy. It doesn't appear that would be an issue for you so may not be relevant.

Is the rental cash flow positive? I think that is the term. If you are making money from the rental why would you sell it?

Yes, cashflow is technically positive but I won't pretend like our spending it totally under control. Sometimes (and by sometimes I mean a lot of the time) we use the positive cashflow.

 

[tonyf7]

You can't fly with a ball & chain tied to your foot.

First, your avatar is awesome. And yes, debt is a weight that holds you down. I agree.

 

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[tonyf7]

Unless you are generating higher returns on the savings / investment accounts, then you should use that cash to pay off the debt.

We are all expecting to become millionaires here, but reality is many of us won't achieve it. Don't assume that your going to be able to generate 10x return using those savings on your next venture.

Do you have good credit? If so then you could borrow the cash later when needed.

You are basically paying out monthly interest to keep your savings and investment accounts topped up, (unless they're making very good returns).

My wife and I have always babied our credit so yes, we have exceptional credit. The returns on our savings is definitely not keeping up with the interest we're paying in debt, so mathematically paying off the debt does in fact make more sense.

Sent from my SM-G935V using Tapatalk

 

[tonyf7]

Have to agree with faithful here. I understand the math side of it, If you're earning more on your money than you're paying in vig, etc, etc. Totally logical.

Problem is the human nature side of it. We're not logical. You'll have ups and downs, and there's nothing more irrational than a guy that's in a downswing making decisions driven by the fact that he has an enormous nut to make every month. Maybe you're a jedi who's immune to fits of irrationality caused by stress. I don't know.

Possible exception to this would be the rental property. Also agree with someone above who said target student loan first. Anything that even a judge can't let you walk away from... you don't want that in your life.

I'm extremely conservative by nature, so feel free to grain of salt all of the above.

Crazy how student loan debt follows you to the grave and then haunts your loved ones after.

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[OldFaithful]

are you also a family man?

Yes I am, and it plays into my decision making matrix all the time. They are much of my motivation to start my own project.

You're from Jonesboro! I've been thru there several times in years gone by. It's a beautiful old town, if I recall correctly.

Congrats on the recent growth of your business, I hope you figure out the best path for you and yours. Oh, and welcome to the forum!

 

[tonyf7]

First, welcome to the forum! I like the research that you have already done into the situation. The forum is packed with little nuggets of wealth you can use.

A few things stood out to me:

First was your level of contentment. Not sure I would mess with that a whole lot!

Second was the desire/need to be either 100% debt free or plow the money into something else. I would encourage you see why you feel that way. You have a lot more options. For instance you could just pay a few thousand per month off of the debt and have it gone in a reasonable time period without wiping out a big chunk of change. You could also start a little side project with the intent of it solely paying off debt (kind of making it a game).

Third, I would encourage you to play the game Cashflow. You can run through many, many different debt/income scenarios in a short amount of time. Based on advice form a previous forum participant, I would use his "play it at least 10 times" rule.

Good luck and let us know what you decide!

I actually bought Cashflow years ago and gifted it to a friend. Things have changed drastically since then and I'm willing to bet it I would get more out of it today than I did back then.

When it comes to debt I tend to be aggressive about it. At 19 years old I got my first credit card and still remember the sting of being in debt and having to work a job I hated to pay it off. That's probably what fuels my thinking behind it all.

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[tonyf7]

After reading through this whole thing I have two opinions:

1) You mention that you like to use the cashflow. I am getting a tiny feeling that you maybe don't budget or spend when you have money. Therefore, I wonder if going debt free will increase your spending habits. What good is freeing up an extra $500/mo if you end up spending it on fancy dinners.

2) I would sell my rental and pay off the house and student loans. Having a free and clear home feels awesome. It relieves alot of stress because you will always have a home with little ongoing costs. You can afford to make business mistakes and still survive and bounce back this way.

If you did not pay off debt and make a bad business decision and lose a tenant, your whole empire could crumble into nothing.

I've actually kept a very detailed excel spreadsheet budget for almost 15 year now. I've gone from one extreme to the other in terms of following a budget.

At first I was extremely frugal and followed the budget down to the very last penny. But after a few years I found out it didn't make for a very happy home life with my wife. Penny pinching made her feel trapped and restricted and she felt that our hard earned money was meant to be enjoyed and not all hoarded. We used to argue constantly about money.

Then we went to the other extreme and became very lax with the budget, spending pretty freely and quickly realized that was not a good road to travel.

Now we're in a good place budgetwise. Not to strict and not to lax either. Sometimes over and sometimes underbudget, but never in danger. We don't argue about money anymore and everyone is happy and we're still saving.

I've already made a "debt freedom budget", factoring in our current spending habits. Very little needs to happen in order to ensure we would continue to save while maintaining our current lifestyle.

Now it's just a matter of deciding whether to pay off the debt, some of it, or none of it and use the money for other things. I'm leaning towards going all in at the moment. You're right about the empire crumbling and I don't like the fragility of the matter and the lack of control regarding that aspect.

Btw, I just read your success story post and it's inspiring. You changed your beliefs, made a decision, took a leap of faith and followed it up with massive action. Well done sire!

 

[tonyf7]

in fact, our educational system is trash so i don't know whether we are lucky or not

maybe not .




don't forget that you guys have more freedom than we have in France.

i won't tell the details because everyone can see what we are saying on the internet, but trust me on this one.

if freedom means anything at all then you are in the right place in the USA

not me.

The grass is always greener on the other side my friend. You guys are learning multiple languages in grade school meanwhile the US struggles to learn proper English.

I'm looking forward to visiting your side of the map this December. [emoji119]

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