Home » You’re Not Just Paying off Debt, You’re Building Wealth

You’re Not Just Paying off Debt, You’re Building Wealth


This post originally appeared in May of 2013, just 5 months after we began our debt payoff journey. Enjoy!

Often the usually long-term task of paying off debt gets tedious and boring, as I wrote in a post last week. The post last week suggested a few ways to keep yourself motivated, and gracious readers added in the comments area their own valuable advice for staying on track when the boredom sets in.

Think Big Picture

But I realized something else this morning that I think we often don’t remember when chipping away at a mountain of debt:

You’re not just paying off debt, you are indeed building wealth.

I used to think of our debt payoff journey as a prerequisite to wealth-building, that we couldn’t officially start “building wealth” until we got rid of the debt. But the fact is that the two tasks go hand in hand.

For every single dollar you pay toward your debt, you are indeed increasing your net worth, i.e., building your wealth, by that same dollar and even more! How so? Because for every dollar of debt you pay off, the amount of interest you pay to the Shamelessly and Happily Taking Your Money Bank goes down, and that means more money in your own pocket!

Let’s use our own family finances as an example. I calculated our net worth in December of last year, shortly before we started our debt payoff journey.

Our Total Net Worth at that time was roughly $140,800.

Assuming, 5 months later, that our house value and retirement fund value stayed the same (retirement actually went up) , and that our auto values stayed the same (they did), and adding that we reduced our total debt from that time down by $4583, we now have a current net worth of $145, 383, a gain equal to the amount debt we’ve paid off: a gain of over $4,500.

That’s not too shabby of an increase in net worth in just 6 short months a gain of roughly 3%, and with no risk attached!

And the really good news is that as we continue to pay down our debt, this number will only rise each month as we pay less and less interest to SHTYM Bank.

SO, when you get bored with living the frugal lifestyle, shunning restaurants, shopping, vacations and all other supposedly “fun” activities, remember that you are not denying yourself a grand living of life, but instead, you are choosing to build wealth so that, as Kim from Eyes on the Dollar said the other day on a comment, “You can own your dreams instead of finance them.”


  1. “You can own your dreams instead of finance them.” love that! And it’s so true. You can’t be truly wealthy if you still owe money to other people. We still have mortgage debt and will for quite a while, but not having any consumer debt allows us to save/invest the money we do have and not have to worry about paying someone else first.

    • Laurie says:

      So true, KK. And you guys will get rid of that mortgage debt soon enough. It can be done so much faster than the term says if you have no consumer debt.

  2. Good point Laurie. A lot of times we only feel like we are just paying down debt but when it comes down to it we are building our net worth which is a good side effect of getting debt free.

  3. that`s so true! and definitely a reason for wanting to own a home instead of renting. Yes, we will need a mortgage, but we will be paying down on something that will be ours, our wealth someday, instead of spending money on something we´ll never see a return of.

  4. I like the concept of owning dreams instead of financing them! Nice way to put it.

    Ultimately, living off other people’s money (debt) can only last so long. The payback can be really tough, and especially crazy if it’s consumer debt. Best to own up to our responsibilities, and live within our means. By doing so, and making smart choices with our spending and saving, we can actually live a lifestyle that’s truly ours. Without, of course, a balance due with interest paid to someone else!

    • Laurie says:

      It’s kind of fun, Glen – you should do it! I found out last night from Rick too that our retirement numbers are higher than what I thought they were too, so, yea!!

  5. Matt Becker says:

    This is a great mindset and very true. Tracking your net worth can be a really motivating factor. I’m glad you found such a positive way to look at it!

    • Laurie says:

      You know, it’s funny, Matt. We are totally excited about our situation now, just because we’re looking at the results not from what we don’t have, but from what we do have. It’s made a huge difference for us.

  6. Wonderful insight, Laurie! It’s easy to focus on your debt and forgot that you are building wealth and opportunity for yourself at the same time. I love the comment Kim left for you and one we all need to take to heart.

  7. So glad I could motivate you! I must have really been having an on day when I wrote that. It does sound kind of smart in retrospect, LOL. I do think we can look at most situations and find a better way of motivating ourselves. I really admire your family and how far you’ve come. It’s really fun to see the progress.

  8. Justin says:

    This is very true, and something too few people really take time to consider.
    Debt reduces net worth, so paying it off would increase it. I love it, I just wish more people would preach it.

    • Laurie says:

      Yes, it does!! Our motivation is SO high now that we’re looking at our situation this way. I just figured out our May expenses and they’re our lowest yet for the year. Yea!

  9. Liquid says:

    Very good point. The less debt people have the higher their net worth will be 😀 I plan to pay off at least $5,000 of my debt by the end of the year. Not only will I be wealthier, but I’ll also be paying less interest to the SHTYM bank 🙂 The most ideal time to pay off debt is while interest rates are still low like now.

    • Laurie says:

      I totally agree. We are working hard to pound the debt away while the interest we’re paying is minimal. Good luck on kicking 5k of debt to the curb this year – you can do it!

  10. This is what kept me going when I was paying off debt. I had to remember that every payment I made, I was going into a positive direction. Now that I am building wealth faster, I am glad I used that to keep the motivation.

  11. Pauline says:

    well said Laurie, in your case, in spite of the heavy debt you still have a positive NW and that is something you can focus on to keep your motivation. My NW grows $150/month with my mortgage repayment, it is not much in the grand scheme of things but a couple thousand per year always help!

    • Laurie says:

      Absolutely! It all adds up, Pauline. Especially considering that many people’s net worth is staying stagnant or decreasing due to uncontrolled spending.

  12. Renee L. says:

    Like what you said Laurie!,
    You are admitting that you are in debt and start living like it. I know some millionaires live in modest homes and drive used cars. That’s why they are rich. Don’t expect to eat out at fine restaurants. You can’t afford it, get over it. You will be able to go someday soon but not now. Don’t buy new clothes for a while. There is nothing wrong with what you already own. Saving that money for a few months will help get you back on your feet.

    • Laurie says:

      Great thoughts, Renee! And after that debt is gone, eating out at fine restaurants and buying new clothes will be all the sweeter. Thanks for the comment!

  13. Nancy says:

    This post is so true! We paid off $97,000 of secured line of credit debt over six years, the last year using some of our retirement funds (we are retired). At first, I hated the idea of using our long-saved money for debt repayment, until I came to the realization that we hadn’t lost the money, it was still there in our now fully paid for house.

  14. Miranda says:

    I needed this. I knew in the back of my mind that paying off debt was increasing our wealth, but the forefront of my brain kept telling me that we were not going to anywhere with this mountain of debt in our faces. I need to remind myself that paying the debt off, even little by little, is building wealth and getting us to where we want to be. Thanks, Laurie!

    • Laurie says:

      Yay!!! SO glad it helped! It’s amazing how perspective can play such a huge role in encouraging or discouraging you, isn’t it? You guys are doing awesome, Miranda. Keep up the great work!

  15. “You can own your dreams instead of finance them.” I like that! Great post, Laurie. It’s cool to read back on your older stuff, isn’t it? Such a good truth to remind ourselves of as we chip away at debt – which CAN feel like an endless task going nowhere. In truth, it goes somewhere positive each and every payment.

  16. fehmeen says:

    I like the idea about owning your dreams instead of financing them. It resonates with me because I’ve started believing that growth in personal assets isn’t real growth if it has been financed with debt. You don’t own your car unless the lease is paid off, you don’t own the rights to your home until your mortgage is paid off, and the list just goes on and on.

  17. Kurt says:

    You’re so right that paying off debt will, everything else being equal, lead to more money in the bank and higher net worth. That alone makes it worth it! Tough to think of an expense besides interest that provides no benefit!

    But if I’m not mistaken, double entry bookkeeping means $100 paid toward debt has no instantaneous affect on net worth. Debt goes down by $100, but cash balance also goes down by $100. It’s a wash–until those interest savings kick in!

    • Laurie says:

      I have to respectfully disagree, Kurt. If you have a home worth $200k, and you owe 100k on that home (with no other debt or assets), you have a net worth of 100k. If you made a 1k principal payment on that mortgage, you now have a mortgage balance of 99k, a home still valued at 200k and a net worth of 101k. You have effectively increased your net worth by simply paying down debt. 🙂

  18. Raz @ Millennial Struggles says:

    Awesome post! As millennials, my wife and I started out with a lot of debt from student loans and car loans. This past year we made it a mission to pay off all of our loans and finally made it to positive net worth. Having so much debt just makes you feel completely constrained, but it’s a great feeling to see progress each month.

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