$93,900
That’s the exact amount of debt I‘ve paid off in the last 3 years.
Back in 2023, I invested in a small business acquisition. The deal had issues. I had to exit at a loss. An upcoming book will detail every painful part of that journey.
Those lessons also left me with a large amount of debt. Paying it off and starting from scratch would have taken years. Instead, I adjusted my investing strategy to grow my wealth, while reducing my debt.
I’ve done it while building my investments. Specifically, I used $113k of my own money to pay down $94k and invest $181k.
To make this magic work, I used smart leverage and velocity of money, which helped boost my investment timeline. Every dollar came back to me faster, allowing me to redeploy it.
The freed up cash ended up right back into my wealth system.
Unlocking cash can become the game itself. I now enjoy figuring out where I can free up another $50 monthly to put back into the system.
How does it work?
Let’s use a simple example. Assume I have $4,000 in a personal loan with a monthly payment of $200. For the purpose of this example, the APR does not actually matter!
If I’m saving $2,000 a month, I can pay it off in a little over 2 months (counting interest).
But I’ve invested zero and am starting from scratch at month 3.
Here’s the alternative
Borrow $10,000 from a line of credit.
Buy down your debt.
With the remaining $6000 buy an amortized investment at 8% yielding $188 per month for 36 months.
Use your savings to pay down the line of credit.
The result
At month 3, my line of credit is $10,000-$2,000-$188×2 = $5624
At month 5, the line of credit is down to $1248 and I can still expect $6,016 in payments from my investment.
By leveraging time and velocity, I have used $9,249 of my own money to pay off $4,000 in debt and invest $6,000.
Do this multiple times and the gains compound.
What does this mean?
Not every debt should be paid off this way, but it makes any debt look less daunting.
When my business venture failed and I was left with over $200k in debt, it felt overwhelming.
Since then, I’ve been working at it methodically, ensuring that my money is invested when it generates a better return or used to pay down debt and free up cash flow if that makes sense.
The most important part is that it gives me control and predictability.
And I’ve made it into a personal sport to pay down debt more efficiently while creating better returns on my investments.
And don’t worry, despite all that, I get plenty of sun on my face 🙂
Engineer your future. Amplify your wealth. Live your way.
— Miguel
Random thought of the week
I read a note on x.com yesterday that predicted the crash of the entire real estate market, pointing at China as an example.
While I don’t think this will happen anytime soon, it made me wonder.
What else do we take for granted?
For the last 80 years or so, real estate has been a wealth building machine. What if that now fails?
The stock market too. Over 50% of American households are invested via their pensions. What happens if it behaves in an unexpected way?
Miguel’s moves this week
Lines of Credit — down to under $10k. Preparing the next deployment for August.
Portfolio — no moves.
Strategy check — all green!
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Disclaimer: All material is provided for educational purposes only and does not guarantee any financial results. This is not financial, legal, or tax advice. I am not a financial professional. Results vary and are dependent on individual effort, timing and circumstances. There is no solicitation to invest.