Here's the secret to maximizing your net worth while paying off debt.
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00:00What I have instructed my clients to do, which has worked really well, is gather anything
00:05that's going to grow your net worth into this one category called Strive.
00:09And so that includes the investments and savings, but it also includes paying down debt.
00:14And so what that really helps people realize is that there is a trade-off between investing
00:18and paying down debt.
00:19But specifically, if you pay down your debt and you make sure that you do it early enough
00:25and not let it linger forever, debt can become a short-term solution, not a long-term lifestyle.
00:29And so I really strongly encourage people to bucket everything that grows your net worth
00:33into that one same section of your budget so that you can see, well, maybe it is time
00:37for me to pause on doing investing just in the short term in order to pay down this very
00:41high-interest debt.
00:42Or it might also indicate to us that we might need more savings.
00:45In the book, I talk about having at least one month's worth of a cash flow cushion sitting
00:50in your checking account.
00:51What I found was that a lot of people get into credit card debt because they don't have
00:53enough cash on hand.
00:55And when they put it into a high-yield savings account or into a savings account, they almost
00:58feel like they have to break glass to go get it.
01:00And so they'll accrue stuff on the credit card.
01:02So if you have one month's worth sitting in your checking account that helps you stop
01:06living paycheck to paycheck, it reduces the likelihood that you'll get into credit card
01:10debt.
01:11And so building up that one month's worth of cash flow cushion helps you pay down debt
01:14faster.