Debt Free is Not Enough

When I bring up finances with my girlfriends, the first response is usually something like, “Yes, I know. I need to get out of debt.” Sometimes they start complaining about student loans crushing them, and sometimes it's credit cards. Regardless, the outcome is always the same: They think that being debt free is the definition of being financially fit.

And while being debt-free is great, it should only be considered a stop on your financial journey. The money you make now should be there when you need it. That doesn’t mean just next month when you need to pay the mortgage. Rather, that money should be there for you when you retire, or when your kids go to college, or when an unexpected life change comes into play.

Start Planning
Your money should work as hard as you do. You can be debt free and still only have $150 in your bank account. Sure, at least $150 is yours and not owed to someone else, but it sure won’t get you very far.

Sadly, husbands usually precede their wives in death. No one likes to think about it, but, on average, the time you’ll spend on this earth beyond your loved one is seven years. Also, 50% of marriages end in divorce. I'm not trying to be Debbie Downer here, but most of us know that we're going to be spending some portion of our lives without a partner, and it's never a bad idea to establish a plan for financial independence should we choose it, or should it be forced upon us.

For example, how much do you live on annually? Let’s be conservative and say that you only live on $20,000 a year right now. Over seven years, that means you’ll need at least $140,000 to maintain your lifestyle—and this is without a nursing home bill. That’s a good chunk of change—it could buy you a house. Where are you going to come up with it?

Granted, being out of debt is a great start. The last thing you’re going to want when faced with a loss is to have to pay down a lot of debt beyond court costs or funeral arrangement fees. Yet, that’s when most women are faced with financial planning for the first time. Prevent this if you can. Prevent it in your own life, your mom's life, and your kids' lives.

Take the Right Steps Forward
First, get out debt so you’re not chasing after your money. Then, make your money work as hard as you do -- growing in investments, gaining interest, building up your retirement account and your kids' college funds, and more. Create a financial ladder that will build and expand at least as fast as inflation. Here are some of our favorite ways to get your feet wet with investing...many of which you're probably already doing!

Getting out of debt is very important and is a responsible move. However, don’t let that be your ultimate goal. Get of debt and get in control. If you want financial fitness, stop chasing your money and sign it up for a marathon. The finish line is your financial dream come true.

Photo Source: Mauropm