Kevin O’Leary says decision is key to financial success

It’s definitely a move worth making.

Key points

• Being financially successful can mean different things to different people.
• You don’t want to be held back from achieving your goals by lingering debt.

What does it mean to achieve financial success? For some, that might mean owning a home. For others, it might mean reaching a certain level of savings. Or, it could mean being able to retire whenever and however you want. But no matter how you define financial success, shark tank‘s Kevin O’Leary says there’s one thing that could lead you there.

Repay debts

O’Leary insists that paying down debt is the key to financial success. That’s because the money you waste on interest when you’re in debt is money you can’t save or invest. So the sooner you can become debt free, the more likely you are to achieve your personal financial goals, no matter what they entail.

How to pay off a debt

If you’re struggling with debt, the right approach could help you pay it off faster. First, assess your different debts and see how much interest each type charges you. You may owe money on a personal loan, mortgage, and credit card. If your credit card is charging you 18% interest but you’re only paying 7% on your personal loan and 4% on your mortgage, then that’s the order in which to pay off your debt.

From there, you can find ways to reduce the cost of your most expensive debt. Suppose your most expensive debt is your credit card balance. You may be able to transfer it to a new card with an introductory interest rate of 0%. This will prevent you from accumulating more interest as you try to reduce your balance.

Another option is to take out a personal loan and use its proceeds to pay off your credit card debt. If you own a home, you can do the same with a home equity loan.

All of these options allow you to swap one type of debt for another. And it may not seem interesting at first glance. But if you’re able to significantly reduce the interest rate on your debt, it could make it much easier to pay off.

All debts are not equal

O’Leary is right when he says paying off debt could help you reach your financial goals. But that doesn’t necessarily mean you have to rush to pay off long-term debt, like your mortgage. Mortgages usually come with reasonable interest rates, and if this is your situation, you don’t have to worry about paying off your home early.

However, if you have persistent credit card debt, it’s best to pay it off as soon as possible. And once that’s done, tackle your short-term installment loans, like personal loans and home equity loans.

Any dollar you spend on interest is a dollar you can’t use by investing it. Thus, the sooner you are freed from your debts, the more opportunities you will have to grow your wealth.