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FINANCIAL

BUSTING THE MYTH: YOU HAVE TO BE DEBT-FREE BEFORE YOU CAN BEGIN INVESTING

March 3, 2011

As part of a balanced money management plan, set aside 10% of the income from your employment (job or business) into a financial freedom fund. This money will be used to invest in the stock market or your chosen investment that will produce passive income. Passive income, income you make without having to trade your time for money, is essential to financial freedom. For many women, money is not what they are after. It is the time that is freed up to be able to do the things they want to do that is the ultimate goal. Generating enough passive income to pay your expenses is the key to freeing up your time to spend with your family, traveling, or doing whatever activity you love.

Many women are struggling with debt, especially with the challenging economy. The conditioning has been that you must pay off all of your debt before you begin investing. This is one of the biggest myths that can delay you from reaching your financial goals. As a part of a balanced money management plan, in addition to the 10% that has already been set aside for your financial freedom fund, also set aside another 10% or more for paying off your debt. This is not an either/or scenario. Do them both at the same time.
Consider the following scenario: If you decide to pay off your debt first, depending on your personal situation, in 5 to 10 years from now, you are debt free. Well, if you have not begun growing your financial freedom fund, it is still at zero. It is much harder to start from zero, because you do not have momentum on your side. In the case of the stock market, you have also lost out on profits from not having that money growing in the stock market. And if you have not modified the behavior that initially got you into debt, you will attract a financial situation that will send you right back into debt. All the while, your financial freedom fund sits at zero. Use momentum to your advantage and do both at the same time.

I was not debt-free when I began investing in the stock market over twelve years ago. And I will actually be financially free a couple of years before I am debt free because of what I know about the stock market, and the profits I have been able to achieve over and over again, month after month. Remember the definition of financial freedom: when you are generating enough passive income to pay your expenses, you are financially free. Debt is an expense, no more, no less. And because I do not attach any judgment to it, as long as I am generating the passive income to pay the expense, then who cares? Pay it down or off while you are investing and growing your passive income nest egg.

Aneshia Y. Smith
Stock Market Coach for Women

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