Posted By 
Those who are regulars to this site will know that Getting out of Debt is the first step towards achieving Findependence, or Financial Independence.
My latest Motley Fool Canada blog has just been published on this topic, which you can read in full by clicking on the highlighted headline: Getting out of Debt to achieve Financial Independence.
As one of the characters in my financial novel, Findependence Day, says to the protagonists: “You can’t climb the tower of Wealth while you’re still mired in the basement of debt.”
As the article reprises, most of us start our financial life cycle with zero or even negative net worth, depending on how much student debt, credit-card debt or later mortgage debt one has accumulated. So if a young person has graduated from college or university and is able to get out of the hole early in their working life, that should be regarded as a huge initial step towards achieving Financial Independence, or Findependence (my contraction).
Keep up the frugal behaviour that got you out of debt
So how do you get out of debt as quickly as possible? The book coins another phrase, guerrilla frugality, which simply means super frugality, whether brown bagging your lunches, taking public transit or any number of other money-saving activities that ensure that you are living within and well below your means.
The goal is to move from paying out interest on debt to ultimately becoming an investor who receives interest (or dividend) income. There are plenty of other websites on Debt and Frugality and Financial Independence that focus on these topics, some of which you can find from the Hub’s guest blogs. (Example from a few weeks ago: The hard truth about the FIRE movement.)
The Motley Fool article describes the typical process of attacking higher-interest non tax-deductible consumer debt first (usually credit cards) and ultimately moving on to mortgage debt. As the book also preaches, “the key to financial independence is a paid-for home.”
The piece also describes our own family’s story of paying off our mortgage, admittedly at a time in the 1980s when interest rates were high enough (almost 12%) that were highly motivated to do so. Other occasional Hub guest bloggers, notably Sean Cooper, have written entire books on the topic of paying down your mortgage. In one Hub blog, Sean kindly admitted that one of his inspirations for paying down his own mortgage and writing the book was Findependence Day: See Burn Your Mortgage: the Simple, Powerful path to Financial Freedom.
And just this weekend, regular Hub guest blogger Robb Engen eloquently described why he hasn’t yet paid off his own mortgage: See Why I haven’t paid off my mortgage … yet.
Burning the Mortgage is a major milestone that deserves celebration
So getting out of Debt is rightly regarded as giant step towards Findependence but of course that just means you’re finally out of the starting blocks and the true race can now begin. The key now is to keep up the frugal behaviours that got you out of debt and start investing the resulting surplus in creating wealth. Robb touches on this in his piece: his priority is as much adding to pensions, RRSPs and TFSAs as it is jettisoning mortgage debt.
In simple terms, if you formerly devoted $1,500 a month (for example) to debt repayment and/or a mortgage, once that outlay is gone you don’t want to suddenly start spending more. If you can allocate the same $1,500 now to adding to your nest egg, then you’re really on the way to Findependence.
Getting out of Debt and Investing are really two sides of the same coin. The next Motley Fool instalment in this series will look indepth at step two and the Investing piece.
