This week we interview Marcus Garrett about life after debt. We discuss the learn apply teach method, how different generations perceive debt differently, growing passive income, and how to go from heavy in debt to financial freedom. Learn from an expert who literally wrote the book on getting out of debt.

The Wealthy Call It Cash Flow Management

"We call it budgeting, but the wealthy call it cash flow management. And when we're talking about debt, they don't call it debt. They call it leverage."

This quote moved in and now lives in my head rent-free.

Life After Debt

Like most Americans, I was taught all my life that all debt is bad. This is incorrect. You can successfully argue that most debt is bad. In fact, with a few exceptions (like 0% interest), most all credit card debt is bad. I spent 7-years of my life paying off debt that was mostly accumulated in less than three months. That’s how quickly debt can compound when you’re irresponsible, don’t budget, and double down with high-interest debt to fund your lifestyle inflation.

Specifically, why is credit card debt so bad?

The tyranny of credit cards are some of the worse type of debt, perhaps only superseded by payday loans, because they combine the best of the worst worlds: 1) high-interest debt, and 2) low-interest minimum payments. For example, according to a recent survey, the average household has about $7,000 in credit card debt. Assuming they have the average APR of about 14%, if they only make the minimum payments on this debt, they won’t be debt free for another 30-years.

Put another way, their $7,000 debt–assuming they never add another dollar–will cost them 343 months of their life at a total interest rate payment of $9,132!

I would argue that paying $16,000 to borrow $7,000 is almost universally bad debt. However, there is an exception where debt can be used for good. This is where everything we’ve learned about debt gets complicated by the realities of the real world.

The Rich Don’t Call It Debt

“The wealthy call it cash flow management.”

When used strategically, credit can be used to make you wealthier. For instance, credit has allowed many Americans to leverage their buying power in ways that would not have been impossible just a few decades earlier. Whether they view it this way or not, many individuals do benefit from credit.

The most obvious examples, include most car and homeowners. Many of us can’t afford to pay cash for the cars we drive or the homes we live in. While you could argue this means that too many of us are simply living outside of means, I disagree with that blind blanket statement. Yes, perhaps too many individuals over-leverage themselves because they were never taught the power of proper cash flow management. Then again, installing a pool automatically increases your odds of drowning. This doesn’t mean pools are inherently dangerous. It means we need to put the proper protections in place for people who might be around the pool. Like learning to swim, learning financial literacy, debt, and wealth management can give us the wisdom necessary to not only reduce the risk, but in fact, to enjoy the experience (the money, and the pool).

In our more relevant case study, when you can maintain good credit, you are given access to low or interest-free loans that allow you to leverage your finances to build wealth. CBS News found that improving a credit score from “fair" (580 to 669) to "very good" (740+) can save the average household nearly $60,000!

If you’ve got access to the capital or already come from wealth, then cash may be your best and logical option. For the rest of us on the other hand, we can use someone else’s money to lessen or own personal risk. Further, if we can responsibly manager our credit, we can get more access to capital and wealth through options like zero- or low-interest rate loans/credit that allow us to buy or afford assets we otherwise could not. The key here is to use those funds not to by cars with big rims (like a younger, ignorant version of myself did), but instead, to invest in appreciable assets. This mindset shifts us from debt-minded to wealth-minded. I feel this is where I have finally mentally graduated in recent years. Fortunately, my financial literacy is aligning with my financial ability as I have moved up in my career and opened my own second business.

Afterall, the key to overnight success is the first 10 years.

The Wealthy Mindset

With this new perspective, I’m excited to see what I can do next. For example, my future wife and I are both looking into ways to multiply our income streams. If we continued to rely only on traditional work, statistically, we could only expect to see our pay stagnate by our 30s and 40s, respectively.

We want binary options because that makes our choices, and our lives, simple. Unfortunately, life is complicated. Typically, our options are presented to us on a spectrum. There is no longer the simple choice of “right versus wrong,” and universal “truths” like “all debt is bad” don’t stand up against the test of time. Instead, we have to adapt our financial choices to our unique lifestyle goals. For me, that’s opening my own business, scaling an online brand, and building a Community of thousands where I share what I learn along the way. Equally important, they share what they’ve learned with me.

When I was young, my father told me to, “use your 20s to learn, 30s to apply, and 40s and beyond to teach and mentor.” I was recently recognized for my mentorship to high school students with Dream Walkers. Encouragingly, when I shared this quote with a 50-year old friend of mine, they had one tweak. “You should use your 20s to learn, 30s to apply, 40s to have fun, and 50s to teach and mentor.”

I guess I’m still not done learning new things! And neither should you.

Marcus Garrett is the host of the award-winning ‘The Marcus Garrett Show’ (Best New Personal Finance Podcast, 2021), and the bestselling author of D.E.B.T Free or Die Trying: How I Buried Myself $30,000 in Debt and Dug My Way Out. Today, he has weekly entertaining conversations with your favorite influencers and entrepreneurs about Life After Debt.