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by Maurie Backman | Published on Aug. 25, 2022
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It's definitely a move worth making.
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What does it mean to attain financial success? For some, it could mean owning a home outright. For others, it could mean reaching a certain level of savings. Or, it could mean being able to retire when you want, and how you want. But no matter how you define financial success, Shark Tank's Kevin O'Leary says there's one thing that could lead you to it.
O'Leary insists that paying off debt is key to financial success. That's because the money you waste on interest in the course of having debt is money you then can't save or invest. And so the sooner you manage to break free from your debt, the more likely you'll be to meet your personal financial goals, no matter what they entail.
If you're saddled with debt, the right approach could make it easier to pay it off quickly. First, assess your various debts and see how much interest each type is charging you. It may be that you owe money on a personal loan, a mortgage, and a credit card. If your credit card is charging you 18% interest but you're only paying 7% on your personal loan and 4% on your mortgage, then that's the order to stick to in the course of paying off your debt.
From there, you can find ways to make your costliest debt less expensive. Let's assume your most expensive debt is your credit card balance. You may be able to move it over to a new card with a 0% introductory interest rate. That will give you a reprieve from racking up more interest as you try to chip away at your balance.
Another option is to take out a personal loan and use its proceeds to pay off your credit card debt. If you own a home, you can do the same with a home equity loan.
All of these options do have you one swapping one type of debt for another. And that may not seem worthwhile at first. But if you're able to substantially lower the interest rate on your debt, it could make it a lot easier to pay off.
O'Leary is correct when he says that paying off debt could help you achieve your financial goals. But that doesn't necessarily mean you have to rush to pay off a long-term debt, like your mortgage. Mortgages commonly come with reasonable interest rates, and if that's your situation, you don't have to stress yourself out over paying off your home ahead of schedule.
However, if you have nagging credit card debt, then it's best to pay it off as quickly as possible. And once that's done, tackle your shorter-term installment loans, like personal and home equity loans.
Any dollar you spend on interest is a dollar you can't put to work by investing it. And so the sooner you're debt-free, the more opportunities you'll have to grow a lot of wealth.
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Maurie Backman writes about current events affecting small businesses for The Ascent and The Motley Fool.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
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