Rule #1 Finance Blog

With Investor Phil Town

Why is Debt Getting Harder to Pay Off?

Paying off debt is not easy. Trust me, I’ve been there. It can be especially hard if it’s credit card debt. Credit card debt can be crippling to you, and your wallet. It also makes it impossible to invest.

Think about it, you’re paying 18-20% on credit card debt and you’re also going out and doing great as investor making 15% a year. Sadly, you’re still losing 3-5% a year because of the credit card debt.

It is important to understand the impact of compounding rates of return that apply to you not only as an investor but as someone with debt. It can work against you as much as it can work for you, which is why debt can be so hard to get rid of.

I have come up with some tips on how to get rid of debt, and how to succeed using compounding rates of return to make a lot of money.

Make a Lifestyle Change

The hardest part of getting out of debt is changing your lifestyle. You have to cut back on spending, at least for awhile.

A friend of mine is a single mom with two kids. Neither her son nor her daughter works, and she has two extra bedrooms in her house after the divorce. She doesn’t use any of these resources to get out of debt. She does not change her lifestyle to create capital for investing.

She actually has gone even deeper into debt after buying a new car for her daughter. This is after her daughter complained that her friends at school would kid her for not having her own vehicle.

You can really kill yourself by trying to impress people who really don’t care that much one way or the other.

If all my friend did was rent out the extra rooms and have her two kids get jobs, she could be picking up hundreds of bucks per month. Once her debt was gone she would have been able to invest that extra money.

Make Sacrifices Now & Save For Later

Along with changing your lifestyle, you will have to sacrifice some things you want to do or buy right now. You may want a nicer car or a bigger apartment, but you have to learn to say “No” to those things for now.

Saying “No” was actually something I was good at when I first started investing. After sleeping in the dirt for years both in the army and during my time as a river guide, a fancy apartment wasn’t a big ego thing for me. I did not spend a lot of my money.

As I’ve said before, we get so caught up in things that do not matter. Most people in other parts of the world would give anything to live in the dwellings that America’s least able citizens are living in.

If you find that you are living in a city and the only place you can afford without debt is dangerous, think about moving to a small town. There are plenty of towns nationwide where you can get a job, the cost of living is cheap, and feel safe.

You have to think outside the box.

Stop Focusing On What Other People Are Buying

If you ever think, “Everyone seems to be spending as much money as they want,” stop now. It doesn’t matter what anyone else is spending their money on. Your main focus should be you.

Start to set goals and create a budget that you can stick to. Pay off your expensive debt.

It’s so important that you stop spending money on stuff you don’t need so you can save that money for a great retirement.

You’re going to be able to make great returns investing if you learn Rule #1 Investing. Once you make those kinds of returns I promise that your whole mindset will change about spending. You recognize that compounding your money at a high rate of return will turn one dollar into thousands down the road.

Before we wrap up, what is or what was the hardest part about paying off bad debt?
Leave a comment below and I’ll be sure to follow up with you.

Get your finances in check in just 14 days to get on track to start investing! Try out my 14-Day Financially Fit Challenge to eliminate debt and save for investing.


Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.