Kill Your Debt Now Before The Next Market Crash – Or Else

On a late January 2009 afternoon, I waited for the light rail after just telling my parents I lost my first job after graduating 8 months prior to this moment.  The firm that I worked for had been informed the night before that the big project we just won had been put on hold.  That meant they had to let someone go.  That person was me.

I had over $70,000 of credit card and student loan debt and had just signed a new lease on my dream apartment.  In my head I replayed the advice I heard on the news about having a 3-6-month emergency fund in case you lose your job.  Well, I had one month at best, but not really, with no hope for a job anytime soon.  Why didn’t someone tell me sooner?  Would I have even listened though?  Are you listening?

Why You Need To Pay Off Your Debt Before The Next Market Crash

We Love Debt!

The economy is booming right now. You know what else is booming?


That is right.

Debt is at all time high despite unemployment being so low for the last few years.  Borrowing is easier than it has been since the crash.

Why is debt going up when the economy is so good?  It is because people are in love with debt! The chart below shows how much we continue to love debt.

The love affair with debt needs to end.

That and people seem to have a short memory or no memory of the last crash depending on when you turned 18.

Now, you can’t control what others do, but you can control what you do.

Just like I wish I had been told, and more importantly listened, get control of your money now so you can weather the next storm and take advantage of it.

Since we had lots of debt 7 years ago we couldn’t take advantage of record low real estate prices.  Many millionaires have been made because of the last crash.

And many more people were hurt significantly because of the last crash.

Which one are you going to be?

US Debt Chart 2018

This Is Your Warning

This is your warning right here.  Heed my advice and get rid of your debt and build your emergency fund.

  • Be debt free (mortgage excluded but sure is nice to not have one)
  • Have at least a 3-6-month emergency fund
  • Invest at least 15% into retirement once debt free but do more if you can; perhaps 50%
  • You need to be insured! Get term life insurance, short and long-term disability and long-term care once you turn 60.

If you don’t have the principals met, then start working towards them.  Use these 6 simple steps to get out of debt to build your foundation.

If you have done those things, then start working to position yourself for the next crash so that you can operate from a position of power.  Do this by building up cash to have on hand to be ready to invest it.

Now, this doesn’t happen overnight.  That is why it is critical that you start today.  If you start when the economy is tanking it is too late.

Have a sense of urgency about this now.  Don’t be like me wishing I had a bigger emergency fund after I lost my job.

The Next Recession

There will be another dip or recession.  History tells us that.  We don’t know when it will be, but it will happen.

How will this next one affect you?

It will probably look different than 2008 and it probably won’t be caused by real estate.  I think it will be a student loan bubble.

Students will simply have too much debt and not be able to make their payments.  That will cause havoc in their lives and cause them to miss payments elsewhere including their mortgage or credit cards.

That or people will expect that their loans will have been forgiven by the government and then won’t be.  They will then be left with a big pile of debt even after paying on their loans for 10, 15 or 20 years.

Their whole lives will have revolved around the idea that their debt will disappear and be disappointed when they are rejected.  Recent reports show that 99% of loan forgiveness applicants have been rejected.

Now, that is an insane number but there are very good reasons why it is so high.  It will go down due the these factors but I just can’t trust the whole program overall.  We’ll see how future applications go but it seems so risky to me to wait so long to find out if you qualify.

But There Is Good Debt, Right?

Debt is a future commitment to where your money goes.  The more debt you have, the less freedom you have.

But can’t good debt give you freedom?  Freedom with minimum payments maybe.  Just hope you can afford the minimum payments when the going gets tough.

If you can’t afford your payments did you ever have freedom?  Or just the illusion of freedom.

Pay Off Your Debt Before The Next Market Crash

Listen, I am biased here.  This site is call Debt Free Happens for a reason.  It is called that to let people know that debt freedom is possible.  I once thought it wasn’t and I know many others don’t believe it now.

I expect that most of my readers have bad debt (credit cards, student loans, car loans, etc.) and in my opinion they don’t need to be told to put 5% down on an investment rental property while holding that bad debt.

When you are making minimum payments on debt it is tough to save extra cash to cover the expenses of your rental property and this is where many people get into trouble.

I personally think people can borrow properly by putting the appropriate measures in place when a downturn or emergency happens.  Ideally, you would pay cash for a rental property, but with a loan or cash as payment you need to have the right foundation in place to stabilize yourself regardless.

Have cash to cover a few months of missed payments by tenants, an AC replacement or new roof.  The more properties you have, the more cash you should have.  If it is a newer or older property, then that will affect how much cash you should have access to as well.  This is separate from your own personal 3-6-month emergency fund and should only be focused on AFTER you are debt free and you complete those initial steps I listed.

Kill Your Debt Now Before The Next Market Crash – Or Else


I love the message of FIRE (Financial Independence Retire Early).  It gives hope that if you are frugal with your spending and aggressive with your savings that you could retire long before age 65.  How amazing is that!

Recently, Suze Orman made waves in the FIRE community because of her comments about FIRE on Paula Pant’s Afford Anything podcast.

In her words, she says, “I hate it. I hate it. I hate it.  And let me tell you why.”

Go and listen to the podcast.  It is worth it for many reasons.

Now, the intention of this post isn’t to talk about FIRE.  I do think there is overlap though so please let me explain.

Her whole reaction to the FIRE movement had to do with when something goes wrong.  What do you do then?

Personally, I think she focused too much on having the appropriate amount of cash to cover emergencies/health issues rather have the appropriate combination of cash and insurance to cover you in those big and small emergencies.

The FIRE community immediately backlashed and said she doesn’t know what she is talking about.  Not sure why they care about her opinion now when they probably never cared about it before.

While I think she is not versed in the finer aspects of FIRE done right, which might ease her opinion, she does make some points that they should listen to.

And those who have debt, should take a listen too.  There’s something for us all to learn even if you disagree.

Swimming Naked When The Tide Goes Out

“You only find out who is swimming naked when the tide goes out. Warren Buffet

Swimming Naked When The Tide Goes Out

As I said before, a recession is coming.  While we don’t know when it will be, we do know that it will expose those that aren’t prepared.  Please don’t let that be you.

Whether you have debt or are retired in your 30’s with a million dollars in the bank, if you are swimming naked when the tide goes out you will be exposed.

If only it is as bad as being exposed without a swimming suit, which is embarrassing, and will probably get plastered all over the internet.

Losing your home is worse.  Filing bankruptcy is worse.  Getting divorced over money problems is worse.  Worst of all, people committed suicide over their financial ruin due to the crash.

This is tragic stuff.

Be Selfish!

Do yourself a favor and be selfish.  Give yourself what you deserve.

Take action today and have a sense of urgency to properly build your foundation to withstand the storms of life.  Get rid of your debt.  You deserve to be debt free!

That ‘good debt’ isn’t so good if you have a credit card or student loan bill coming due at the same time.  Don’t listen to those that tell you to invest in real estate when you have $80K of student debt even if you can afford the payments.

Take care of your debt first.  There will be another hot deal out there when you are ready.

Take advantage of the next downturn.  Don’t let it take advantage of you.

It will probably take a few years to turn things around, but realistically, in 5-10 years you can be in a drastically different position than you are today.

5-10 years is quick and during that time you will find your life is drastically easier as you make progress.

Please learn from my mistakes.  Don’t wait until you lose your job to start handling your finances right.


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4 thoughts to “Kill Your Debt Now Before The Next Market Crash – Or Else”

    1. Thanks! I guess I should have been more specific, I am talking about all non mortgage debt here. I am in the camp of thinking a house is awesome to own but if the rate is low it is less critical to pay off if you are investing elsewhere. In respect to a market crash you can’t lose a paid for house and not having a mortgage will make it easier to withstand a job loss so I guess the advice still applies here. Thanks for the comment!

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