Welcome to the Ten Talents Guiding Principles series! This article dives into Guiding Principle #5, “We pursue financial decisions that eliminate debt obligations.” If you haven’t read the Introduction to the Guiding Principle series, you can check it out here.

Debt and your financial plan

One hot button topic in financial planning is the use of debt. What is meant by debt in the financial planning context? Debt is any amount that you owe to a person or institution where you have an agreement to pay back the amount, usually with interest, over a period of time. Debt can include credit card payments, student loan payments, personal loans, and car loans or leases. If you are making “payments” on anything, you likely have debt.

At Ten Talents, we believe that debt payments are at odds with building wealth and achieving financial peace. As a result, we help clients to get out of debt as fast as reasonably possible. Our goal is to eliminate all debt obligations so that our clients can save, invest, and give, without the anxiety that accompanies debt payments. For many, this is a mindset shift since debt payments have become normalized. We want what we want, when we want it, and debt helps to maintain this immediate gratification lifestyle.

What about mortgage debt?

You’ll notice that in the examples of debt above, mortgage debt was not mentioned. While a mortgage payment is most certainly debt, we acknowledge that a mortgage payment is fundamentally different than, for instance, a car payment. A home is primarily a place of shelter for you and your family. Yes, there can be financial advantages of buying a home and using mortgage debt to provide a place of shelter but we don’t view home buying as an investment decision. Your home is not an investment and the home owner lifestyle is not for everyone. We seek to guide our clients in a prudent discussion of “to buy or not to buy”. Our goal is to help minimize regret and empower clients to continue pursuing financial goals beyond owning a home.

The ultimate goal

We realize that seeking to eliminate debt obligations is not a key distinctive of every financial planning firm. For example, one client shared how another firm told them that paying off their mortgage was a bad financial move and you should always have a mortgage because of the tax benefits. Paying off your mortgage has pros and cons (just like any financial decision) but we praised this client for their tremendous accomplishment!

You see, if the ultimate goal is financial peace and freedom to invest and give, being debt-free is part of that path. There is a biblical Proverb from King Solomon where he writes, “The borrower is the slave of the lender”. (Proverbs 22:7b) We want to help clients break free from the debt cycle, build true wealth, and not be a slave to debt payments. As a result, pursuing the elimination of debt is one of our Guiding Principles and a key element to our financial planning approach.

– Kaleb Paddock, CFP®

You can learn more about Ten Talents and Kaleb, a financial planner based in Parker, CO, here.

This is part 5 of 7 of the Ten Talents Guiding Principles series. To learn more about the Guiding Principles series, please check out the Introduction here.