Why Can't I Invest and Pay Off Debt At The Same Time?

[Music] Brought to you by the Every Dollar app. Start budgeting for free today. >> All right, today's question comes from Dean in Iowa. He says, "If I have debt, but also want to invest, why can't I do both and benefit from the compounding interest? I'm 21 and have over 95,000 in college debt. I won't be able to pay that before I turn 30, and I don't want to wait that long to build wealth." Okay, so Dave, we hear this a lot. Um, it's kind of like that age-old argument of why can't I invest whilst paying off debt or why do I need to wait till I'm done paying off debt to invest? And the biggest thing I mean, if I go back to the basis of it, it is your income being your biggest wealth building tool. So, here's the thing. You have $95,000 in debt, which means a portion of your income is going to be going to paying that off. And the longer you wait, the more of that income is not helping you build wealth. So, while you might be able to put I mean theoretically, yeah, you could put some money into investing, it's not going to be the full scale of what you could or should put in to build ultim ultimate wealth. So, why wouldn't you just clear that out? Because here's the thing. The compounding interest >> works on your debt, too. >> Yeah, that's the thing. that 95,000 that's going to accumulate that's going to accumulate more and at a quicker rate than when you start from zero investing you know your $100 here and there. >> Yeah. So Dean, you're 21. You can do whatever you want to do, honey. You're like an adult and stuff, but you wrote us an ask. Um you're full of opinions and the wrong >> and you wrote us an ask. So, here's the truth. The probability of you getting out of debt, if you don't focus on it exclusively and with great intensity and get your little butt in gear, the probability of you ever paying off that student loan is close to zero. If you think you're going to wander out of this over 10 years like you've kept the flu for 10 years, you're not going to do it. You're simply not gonna do it. We've worked with people getting out of debt for way longer than you've been alive. And so, you know, tens of millions of people have followed our stuff and gotten out of debt. And one of the keys is for you to get fired up and wired up where you turn it on. Don't talk to me about being 30 years old and still having this debt. >> How about 24 years old and it's gone? Three years from now, $30,000 a year cuz all you do is work, young man. You have lots of energy. Go use it. Go get you some money. You have made a mess and you need to clean up your mess. And the faster you put this in your rearview mirror with the faster the intensity, the higher the probability that you ever build wealth and the higher the probability you ever get out of the student loan debt. The number of people who drag out student loan debt and systematically pay it off over 10 years or 20 years is almost zero. They either do nothing and it stacks like cordwood in the backyard or they get after it and they knock it out fast. There's hardly anybody in the actual data that does the middle ground and goes, I'm going to very slowly and methodic. Nobody does it. >> They don't do it. So, you get fired up and wired up. So, your set of assumptions are wrong. It's not going to take you nine years. You gonna pay off nine $900 I mean $9,000 a year. Come on. How wet is that? Come on. Don't be a wuss. Do it, man. Come on. $9,000. Come on. That's nothing. You need to pay off 30 $35,000 a year cuz all you do is work. Clean up your mess. And then you're sitting there at 24 years old without this thing hovering over you >> like most broke Americans walking around with their own spare bedroom for freaking Sally May. They've kept her around so long she's like a member of the family. the old ugly aunt with a wart on her nose. >> Mhm. >> And she's stuck in the back bedroom and we're paying payments for her all the time. We can't get rid of her cuz you won't give her an eviction notice. Dude, roll up your sleeves and punch it in the mouth. Tell Sally she gone. You're out. You're done. You don't get to live here. I don't like you. You're ugly and you're inhibiting my future. You are going away. You have to get mad about it and knock it out fast. It increases the probability of doing it. It destroys your little formula because now you're out of debt at 24 or 25 and now you can build wealth really, really fast because you're used to living on very little and paying off a bunch of debt. We can transfer that to living on very little and investing. You probably be a millionaire by the time you're 35 if you do what I tell you to do, what Jade told you to do. >> But if you don't, you're going to be normal. And if you want to look up the statistics on normal in America, normal sucks really bad. You do not want to be normal. It's a disaster. So, your goal is to be weird. That's our thing around here. >> I know. That's right. Yeah. >> That's how you do it, man. That's the answer. And so, but yeah, if you make a set of assumptions, you're going to be there. And by the way, compounding interest works on debt. Exact same math. Works against you and as it does working for you with investment, >> right? >> The only difference is the rate. The only difference is the rate. If you're saving money at the same rate that you're paying off debt at the not paying off debt at the same rate, you have broken even. Exactly. If you're do it at a lesser rate, you still broke even because you're carrying around all this risk and the increased risk that debt represents. So the answer folks, the way you know Jay, when I was growing up, bunch of us little bit hillbilly kids, we running in the house and back door be opening, closing, opening, closing all day. You know, your mother says stuff like where you raised in a barn, that kind of stuff. And finally, the heat of the summer, she would have it. She'd be done with these kids running in and out, the neighbor, kids, me, everybody else. And and she would just go, "That's it. The worm has turned." >> Now, we had no idea what that meant except that the beatings were getting ready to begin, right? That's all we knew. And so, but I turn found out later it's actually from Shakespeare. Who knew mom knew Shakespeare? But yeah, there you go. So, but all all I knew was she was sick and tired of being sick and tired. >> Yeah. She had had it up to here with these kids and putting all the air conditioning in the outside and running up the bail. She'd had it. >> And when you kind of got to get that thing going like, "Mama, the worm has turned. I've had it. I'm not living like this anymore. I make too much money to be this freaking broke. I live in the most prosperous time in the most prosperous country in the history of mankind. And I'm broke. This is stupid. I'm going to change." When you get that thing going like that, little little preaching going on, then then you can you can turn it you can turn it around. >> But Dean, it's not it's not a compound interest problem, honey. It's a Dean problem. >> Just like when I went broke, it was a Dave problem. >> Listen, I think it's about him wanting to take the easy way out. That's all I think. I think you look at 95,000, you go, that seems like a lot of work. It seems a lot easier to go over here and put my little $100 over here. I'm taking the easy route. And I think it literally just boils down to that. You can either do the work and get the full the fullness of what you're supposed to have or you can punk out and take the easy route. >> You know, I was I said that on this on the show last week. I was being interviewed in a leadership situation the other day and a guy said, "You've got all these Gen Z's working for you." And I said, "Yeah, I love that generation. They're incredible." >> Uh they're an incredible generation because they've grown up with a magic wand in their hand and if you push a button, stuff happens. Things show up on your front porch. >> Man, that's right. >> Anything's possible for this generation. They're possibility generations and it's fast. >> They think anything can happen, but it all happens fast. That's the downside. And and he said, "Well, what about them being entitled?" I said, "They're not entitled. They're just impatient." >> Yeah, that's that's good. >> Cuz they're used to everything coming fast. It comes easy, comes fast. You just push a button and crap happens. You can't even have an argument cuz somebody's got the answer before the argument's done. It's like, good gosh. And so, um, you know, it's, you know, but but it's, you know, but here's the thing, guys. There's no such thing as good microwave barbecue. That's an oxymoron. There's only one way to get barbecue. You cook it long. >> The dog the neighbor's dog is howling. >> That's how good barbecue is made. Okay? And it's like a long cook. Long slow cook. And guess what? Money's the same way, baby. And so you can't push a button. There is no easy button. And uh while all things are possible to Gen Z, you better you better buckle up, buttercup, because you're going to have to learn some maturity. And one definition of maturity is learning to delay pleasure to get something better. >> That's an emotional maturity. That's psychological maturity, spiritual maturity right there. You you delay pleasure to get something better. >> Perseverance. >> And you'll get a callous while you're doing that because you'll be working all the time. >> And calluses are good for you and patience is good for you. It's called growing up. >> Yeah. And uh but I tell you, man, this a great generation. If we dropped a little bit a little bit of that in the in the soup, they're going to be the best generation we've ever seen >> cuz they believe anything's possible and they go after it like it's possible. Yeah. >> But quit looking for the stinking easy button. You're right, Jake. You're absolutely right. Create your free every dollar budget today. The simplest way to budget for your