This Is What’s Keeping You Poor

Summary

• A significant portion, about 35%, of each paycheck often goes to paying off loans or debt. It's important to recognize that mortgages, car payments, and credit card bills are all forms of debt.
• Viewing your paycheck as a pie can help you understand where your money goes. If one-third is consistently spent on debt, it's clear how lenders make enormous profits.
• Financial institutions and banks are successful and last for centuries because they make massive revenue through interest from loans and credit. Money is their product, and they thrive because of it.
• Instead of trying to earn returns in the stock market, where you might get 9-10%, focus on paying off high-interest debt like credit cards, which can have rates around 24%. Paying these off is like a guaranteed 24% return since it stops money from leaving your pocket.
• Prioritize eliminating high-interest debt because it's like having a constant negative return acting against your ability to build wealth.

Video

How To Take Action

A good way to start taking control of your finances is by identifying where your money is going each month. I suggest seeing your paycheck as a pie and figure out how much is eaten up by debt. Realize that things like mortgages, car payments, and credit cards are all debt. If you see a big chunk of your paycheck going there, it’s time to make a change.

Focus first on the debts that have the highest interest rates, like credit card debt, which can be around 24%. Paying these off should be a top priority because it's like getting a guaranteed return on your money. For example, paying off a credit card with a 24% interest rate is a better move than hoping for a 10% return in the stock market. You'll stop money from flowing out of your pocket each month.

Another suggestion is to set a budget that prioritizes debt repayment. Cut expenses where you can and funnel any extra cash toward eliminating high-interest debt. The faster you pay these off, the quicker you free up money for other goals.

If you have multiple debts, consider strategies like the debt snowball or avalanche methods. The snowball method involves paying off the smallest debts first to build momentum, while the avalanche focuses on the highest interest rates first.

Remember, every step you take to reduce debt is a step closer to financial freedom and wealth-building. Start small, be consistent, and watch your financial health improve over time.