Get rid of debt ASAP
Albert Einstein is said to have called “compound interest to be the most powerful force in the universe.” Although it’s still not clear if Einstein actually said this or not (sometimes we like to attribute certain quotes to smart people so that they carry more meaning) I believe most economists and mathematicians will agree with this statement.
But why is it so powerful? It all has to do with the word: momentum. Compound interest can either generate positive or negative momentum. It either works in your favor or against. Momentum is a fickle concept. It swings on a pendulum of emotions from one side to the other. You see momentum in action everywhere: in sports, money, business, relationships, and life. This is why when teams or individuals are winning, they’re dominating. This is also why when it rains, it pours.
“Winning is a habit. Unfortunately, so is losing.” — Vince Lombardi
When it comes to compound interest, if you aren’t winning, you’re losing. If you aren’t getting rid of debt, the momentum is not in your favor and you’re most likely accruing more debt. Get momentum on your side by taking small steps toward getting rid of debt ASAP.
Read Dave Ramsey’s post on the Snowball Method. Here, he describes the power of momentum as it relates to paying off debt. The idea is to eliminate the smallest debt first, then work your way up to the largest. In doing so, you will create momentum in your debt snowball.
It sounds simple, but that doesn’t mean it’s easy. Because once you have paid off the small debts, you will now have extra cash each month leftover that should be used toward paying off the larger debts. That requires effort and discipline, which is simple to comprehend, but difficult to execute.
Debt is expensive. It will suffocate you and impede your progress. The things you buy today rarely go up in value tomorrow. The lie we’ve been told is that “debt is free today and will cost something later, but don’t sweat it! Go buy what you want!” It’s tough to refrain from instant gratification to avoid a lifetime of fees and anguish. But it’s worth every penny.
The best time to start getting rid of debt was last year, the second best time is today.