This post is part of the “Step-by-Step Guide to (Passive) Military Investing” series:
- Maximize your TSP matching
- Eliminate your consumer debts
- Start investing small (1%)
- Buy investments
- Increase your monthly contributions
- Diversify
- Keep buying and holding… don’t panic sell!
Are you still paying off that Dodge Charger you bought after basic training (and still paying that 23% interest rate)? Ok, you might not have done that, but most of us don’t think much about how much we are paying in interest on our consumer debts every month.
The intent of this post is not to concentrate on debt reduction. However, it is key to being able to build wealth. For example, if you are paying 12% interest on a credit card, earning 7% (on average) from your index funds is not going to build your wealth. Your credit card balance is a hole in your financial bucket, and your hard-earned money is running out the bottom of it. Fix your finances by paying off these consumer debts first.
A great program is Dave Ramsey’s book, “Total Money Makeover”. In the 2nd of his “7 Baby Steps”, he tells people to list all of their debts (in order from smallest debt to largest – regardless of interest rate). Then, pay off the smallest debt as fast as you can. Then, attack the second smallest. And continue until they are all gone.
For more detailed information about how to eliminate debt with Deve Ramsey’s method, please read the post titled, “How Debt is Holding You Back, and How to Fix It.”
Return to the Step-by-Step Guide to (Passive) Military Investing” series