I expect that this post regarding the 4th principle for financial independence will generate some controversy.
4. Dump debt.
A statement was written thousands of years ago by the wisest man who ever lived on this planet. When Solomon was ruler of Israel, he wrote many proverbs, one of which is recorded in Proverbs 22:7, which says in part, “…the borrower is servant [or slave] to the lender.” But, wait, there’s more. A recent survey of over 10,000 millionaires in the United States revealed that the overwhelming majority of those millionaires began to achieve financial independence and grow their net worth when they started getting rid of debt. If you want to double check that, please look in the book Everyday Millionaires written by Chris Hogan and published in 2019.
This information really isn’t anything new because that same information was also contained in two books written by the late Dr. Tom Stanley, The Millionaire Next Door, and The Millionaire Mind. There is a powerful statement in the Introduction to The Millionaire Mind that should give everyone pause. It was a statement made to an investor by a banker in Oklahoma City, Oklahoma. He said,
Dr. Stanley goes on to write in the Introduction to The Millionaire Mind, “How many people today in America run ‘their businesses’, ‘their professional practices’ [or maybe run rental complexes?] but actually work for or are being controlled by lenders? How many live in luxury homes yet work hard to make payments to the ultimate owner of the mortgage? How many people take care of autos they lease from the real owner? Too many.”
Dr. Stanley goes on to talk about how in his study of multi-millionaires with an average net worth of between $4-10 million, none of them had a private credit officer doling out cash. Hence, my position that to obtain financial independence, you need to dump debt. That way, you reduce your risks, such as for landlords who have tenants who are “supposed to make the mortgage payments” by paying rent, and the tenants stop paying. What do you do then?
Not only does dumping debt reduce your risk, but the less you pay out in monthly payments, the more of your income you get to keep.