This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth
so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an absolute entrepreneur. All right, so should you start trying to build wealth even though you have some debt? Maybe you have credit card debt or you have student loan debt or you have car loan
debt. And there are those that say that you should make sure that you have all of that taken care of before you start investing. And there is a reason for it. And mathematically, it may make sense, but I think in the long run, it may not. I don't necessarily agree with it, but here's the first things first is I want us to understand debt to begin with, and that is this. I don't believe that all debt's the devil, but I do understand
that all debt has two personality traits. All debt costs, whether it's productive debt or destructive debt, it costs. It's called interest. You know, whether it's 2% or 28% on a credit card or somewhere in between, it's costing you. Okay. The second personality trait is all debt stresses. It stresses not only your finances, because it's requiring you to pay more. And you've got this payment hanging over your head, but it stresses your psyche, it stresses your psychology. So, again, whether
it's productive debt or destructive debt doesn't matter. They all have those two personality traits. Now, that means that we're going to need to deal with those as part of your wealth journey, as part of your path to financial freedom. And. And the thing that we have to, to realize is that building wealth, building wealth and controlling your money and mastering your money is as much a psychological gain as it is a behavioral game as it is
a financial game. See, a lot of times, we think it's just financial. I got to make money, and I got it, and I got to invest it, and I'm going to be wealthy. Now, the thing that gets in the way is the behaviors and the mindset. So this whole process is going to need to incorporate all of it. So the question really is, should I wait till I'm out of debt, I. Before I start investing, or should I invest and get out of debt at the same time?
Now, here's why I think this is important. I'm going to jump to my iPad. We're going to walk through this because I think one of the things that we need to understand is something that I call the wealth creation curve. Okay? The wealth creation curve does this. Okay? And there is a section of this wealth creation curve that we see that I call this section here that I call the wealth flatline. Okay? And this is the place where you will start investing. You will start putting money away,
but you don't feel like you're making progress. Literally, you'll do it for years and you might make $67 or something, and you go, this is crazy. I'm not getting anywhere. Here's the thing. At the beginning of your investing journey, at the beginning of your wealth journey, what you're really doing is you're putting money into an account, you are putting money into investments, and you're compressing a spring. You're pushing and you're pushing and you're pushing and pushing, compressing a
spring. And there's a point in time, the tipping point, where that spring is going to release. This is where you get money momentum. And where money momentum. This is over here where you get money momentum. This is where your money machine is built. This is the acceleration zone. The challenge is that if we don't stay in the game long enough, because the only way that we can move through this is something
called time, okay? That we need to get in the game as early as possible and stay in the game as long as possible so we can bypass and get past this tipping point to make that happen. Now, this is, to me, one of the biggest reasons I say that you want to consider start building wealth even if you're not completely out of debt. Now, let's just be real clear. When it comes to debt, I want you out of debt, at least
the destructive debt, as quickly as possible. That means that we don't do this unless you have a debt payment plan in place. You got to have a debt payment plan in place knowing that you're getting it paid off. And the lion's share of your cash is probably going to go to pay down debt, because economically, it makes sense. But here's the other thing that I know. Wealth creation is behavioral. In fact, your ability to create wealth is going to be much more driven by your behaviors than it is
ever by your money. And it's about your choices, your decisions and your behaviors and habits around your money that will drive your ability to create wealth. But so is debt. Debt is behavioral, too. Debt is something that we will use as a tool. That tool, though, might be going against us if we're not careful because of the interest costs and all that stuff. So it is behavioral just the same. But they work from
two different muscle groups, two different mindsets. One is a creation building mindset, and one is a, oh, I got to keep up. I got to keep up. Kind of get out of the way mindset the debt. So it's developing two different mindsets. And why I want you to start creating wealth or investing, even if you are still in debt, you're not 100% out of debt is because I want you to start developing the muscle. I want you to start developing the habits, I want you to start
developing the decisions and all that stuff. It's not about the money. Like, here's the deal. If you had, let's say you had $500 extra a month that you wanted to put towards debt and investing, you might put 450 of it, 90% of it towards your debt, and 10%, $50 of it towards your. Towards investing or even less. The point is, you're on the wealth creation curve. You're starting to develop the habit of putting money away for the future, versus the only habit you develop when
you're getting out of debt is digging out of a hole. Now, we need you out of the hole, and this will extend the time to get you out of the hole. Yes, but it also gets you developing the habits and the processes and the automations to get muscle, get money invested in building wealth in that process. How do we do this? There are a few things that I want you to consider when we do this. The first thing is this. You have to take a look at your situation.
If the debt that you have is just a balance that's carried forward from some past deeds, it could be a student loan balance, it could be a car loan balance, it could be something that was put on a credit card because you had a medical situation, you didn't have, you didn't have the emergency fund or the comfort fund, as we talk about it, in place to make that happen. So you put it on a credit card. So there is a difference between having that balance that you're
carrying forward. And if you have a situation where what you're doing is putting your current living on credit cards, your current living on debt. In other words, every month you have more more month than you have money, you have more expenses than you have cash that you have to, in order to make ends meet, you're putting on credit cards which means that you're digging a deeper hole each and every month,
and you can't keep up. Those are two different things. Because if you are digging a hole each month, the absolute first thing you need to do is, number one, stop digging. Okay, we have to stop the bleeding. Now, this is going to take some. Some really, really critical, tough, hard, tough love decisions. That means that at this point, we have to look at two sides of the equation. What's going
out, what's coming in. Okay. That means now I have to get really critical about every dollar that goes out the door, breaking it down between needs and wants. And the only thing I'm going to start cutting out wants. So I am no longer digging a deeper hole each and every month. Now I get it. We don't want to do this, because I truly believe that you cannot live a wealthy life, you cannot live a
rich life through deprivation. But in a short term, if we are in a bad situation and we're continually going deeper in debt by going living on credit cards, that means that we are living well beyond our means. And that means that we have to start cutting. We have to be surgical. We have to start cutting the things that absolutely are not necessary in order to get ourselves righted. And we don't
continue going in debt at the same time. At the same time, we have to look at the income side of the equation. Is there a way for me to get my income up? Is there a way for me to get a bigger shovel to throw at this? Are there side gigs? Are there things that I can do to get extra hours at work? Are there things that I can do to get a project or some sort of additional income stream that I can use to supplement this and get out. Cause you have the
two sides of the equation. And the one is I gotta cut expenses. The other is I have to increase income. And I get this. This isn't a fun situation if you find yourself in this situation. However, it's not a permanent situation if you make some really, really tough decisions and you stay committed to it. I've been there. I've had clients that have been there, and we gotta stop digging. Okay?
So if you're one of those that are sitting back saying, gosh, I'm having a hard time making ends meet, then we need to be surgical with our income and with our expenses. Okay? Now, if you're not or you have now got a handle on it, and now you just have this debt that you're carrying forward, then what you want to do is get yourself on a debt payment plan. And the way to do this is go to melabraham.com. no debt. Okay. There you'll have access to a free template,
a tool that is called the debt breakthrough calculator. In there, I'm going to have you put all of your debt in, okay. All of your debt in, the interest rates, the payments, the balances. And now you're going to have a chance to go through and organize
the debt. Whether you're going to use the snowball method of pay down, which is the smallest balance first, or you use the avalanche method of pay down, which is, which is the highest interest rate first you can change the structure of it, but then it'll set up all your payments for you. Okay? It's totally free and there's a short training that shows you exactly how to do it. But the important thing is that you get on a
debt payment plan. I do not want you to start investing until you are on a debt payment plan that you know that you have a schedule, you have a plan, and that this debt will get paid off in a certain number of years. Okay, if that's not the case, then we have to fix that first before we start going into investing. But can you invest when you're in debt? Yes. Once we stop the bleeding, we stop the digging, and we have a debt payment plan in place now we can start to look at.
Okay, do I have a little bit of extra cash to start investing now? Where do you invest and what do you do? First, I default to something that I talk about in my book, building your money machine. If you don't have it, you should. Building your money machine. It's USA Today bestseller. You want to grab it. And in there, in chapter twelve, I talk about the wealth priority ladder. I literally give you the recipe of what to do with each dollar when it comes in. At the very
beginning. One of the reasons we find ourselves in debt is because we didn't have the liquidity to carry ourselves when something happened. Okay. Unless it's car loan or student loan, that's a different discussion and whether we should be doing that as a different discussion for another episode, another time. But bottom line is this, okay, there is a hierarchy and a process and a recipe for you to follow. It is not a
suggestion. It is a prescription. When you follow it, you will maximize the use of your dollars, you will maximize your investments, you will minimize your risk. You'll build an unshakable financial foundation for you to be able to grow from. And so the very first place that you're going to do, the first thing that you're going to do is all dollars will be allocated to giving you breathing room and liquidity. In the book, we call it at the very
first level, something called a comfort fund. If you have no cushing, nothing to give you breathing room, then that's where we start. $1500, $1,500 or one month's expenses. I just want you to put it aside in a high yield savings account. Put it aside in a high yield savings account. If you're not sure how to get there, then I want you to look at, again your expenses. But really, this is just one number that we're
trying to get to, to just give you some breathing room. And one of the things to do, y'all check around your house, check around your places. Are there things you don't, you don't use? If I just go back into my, into my tech closet, there's plenty of technology that I'm not using. I don't tell my wife, okay, but the fact is that I could put it on Facebook marketplace, I could put it on Craigslist. I could sell some things to try and get at least
$1,500. The purpose of that is if I have a medical situation, I have a deductible I have to pay, or I have something that is momentary, that is temporary, that isn't a long term sustained emergency. I have that there for breathing room. Once we get there, I want you to make sure that you have that debt payment plan in place. Now we're building our peace of mind fund. This is the emergency fund. We call it a
peace of mind fund. So this, I want you to start putting money again into a high yield savings account to put money away for liquidity so you don't find yourself in debt or in a bad situation down the road. And then we can look at investing, and there's a hierarchy in the book that talks, talks you through exactly what to invest in. If you're working in a company that has a 401K, that has a match, that's the first place we're going to do. We're going to get as much free money in our hands
as possible, and then we'll move from there. But the bottom line is this, can you invest while in debt? The simple answer is yes. But the only time you do it is when you have a debt payment plan in place and you stop the bleeding. So if we're living beyond our means, we have to write that ship first. Then we get ourselves on a debt payment plan. And then we take a portion of the money that we are putting, that we could put towards debt, a very small portion. We start investing only to
exercise the muscle. Is this going to make you rich? No, it is not. Okay. So you might sit back and say, I'm only going to be able to put $10 towards. Towards some of this. That's okay. That's okay. Because the purpose of the $10 isn't to make you rich. The purpose of the $10 is to exercise the wealth building, to muscle, to get you into the process of putting money away for the future, to deciding how you're going to invest it, to
being deliberate and intentional with what you do, to get you into. To a place where you're checking the expenses, the outgos, to make sure that it works for you and, and not against you. Okay. And that you get control of your finances. So it is the thing that we start to do. You can do it at the, at the same time, I think it's the better way to do things because I want you to work both the debt management muscle group and the wealth creation muscle
group. I don't want you to delay wealth creation, but I also don't want you to delay the debt management because we got to get you out of the. Especially the destructive debt. Okay. Especially the destructive debt. So with that, that's what I would do. Yes, you can do it. Just, you got to have a process. You got to follow the recipe or the prescription. Do that in my book. And we can go in more detail about some of the nuances when it comes to that.
But I wanted to answer the question, can you build wealth if you're in debt? And the answer is yes. I hope you found this of value. And if you have specific questions or things that come up, do me a favor, let me know, and let's see if we can get them answered for you.
Let's get you on the path to financial freedom. All right. And if you have not subscribed to this channel, subscribe to this channel, because we are putting out a lot of content just for you or free to help you find your path to financial freedom. Listen, I don't sell investments. I don't sell insurance. I'm not here to do any of that. I'm not trying to build a book of business. I'm simply here trying to light the path to financial freedom for a million families. And I want one of them
to be you. I want to sell you on one thing, and that's your dreams. All right. All right. Until we get a chance to see each other in another episode, are on the road. Always, always strive to live a life that outlives you. Thank you for listening to the
affluent entrepreneur show. With me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group, and I'll see you there.