Dear DTA,

My goal is to invest so that I can pay off my debt faster. 

-John H. 

Thanks so much for writing in, John.

You’d be hard-pressed to find a bigger fan of investing than me.

Intelligently investing my capital regularly has led to life-changing results. 

For perspective on that, my net worth was below $0 as recently as 2010.

Realizing I was in a financial position where my debt was greater than the sum of all of my assets, at almost 28 years old, was an eye-opening experience.

I was below broke, which is something I didn’t even know you could be.

But it motivated me to totally change my life around.

By making some key lifestyle changes, I was able to start saving 50%+ of my net income regularly.

And I started plowing the savings into high-quality dividend growth stocks like those you can find on David Fish’s Dividend Champions, Contenders, and Challengers list.

This list contains invaluable information on more than 800 US-listed stocks that have all raised their dividends for at least the last five consecutive years.

I chose dividend growth investing as the investment strategy to help me dig out of my hole and eventually become financially independent.

This is because dividend growth investing is a simple and straightforward investment strategy that involves buying equity in some of the world’s greatest businesses. 

And since many of the world’s greatest businesses are regularly generating the big and growing profit necessary to pay out big and growing dividends, dividend growth investing is essentially customized for someone aiming to achieve financial independence – the growing dividends are a fantastic source of passive income that should grow faster than inflation over time.

The end result of all the saving and investing (at least as of this writing) is the six-figure dividend growth stock portfolio I now own and control, which generates the five-figure and growing passive dividend income I need to cover my real-life bills.

This has rendered me financially independent in my 30s.

And I went from below broke to financially independent in about six years.

So as you can see, I’m a huge proponent of saving and investing. I’m an advocate because it’s changed my life.

But that isn’t to say that investing should take precedence over paying off debt. And investing capital that is otherwise earmarked for repaying debt is probably not a prudent move. 

Keep in mind, I didn’t have credit card debt when I started my journey to financial freedom. And I quickly sold a car that had a lien on it.

The only remaining debt I had at that point was student loan debt, which offered favorable terms (a very low interest rate across the loan portfolio, as well as tax advantages).

If not for this, I would have paid off debt before investing any of my money.

Would that have been a wise move?

Well, the stock market has gone to perform very strongly over the last six or so years. That means investment returns would have exceeded most debt interest rates.

But hindsight is 20/20. And the stock market isn’t currently where it was at six years ago. Moreover, interest rates are rising, which could impact some of your debt.

I’m not sure what kind of debt you have, nor do I know how much debt you have.

But I’d be very careful about investing money in order to pay off debt. In fact, it’s not something I’d really recommend. 

However, that doesn’t mean you can’t make moves in order to pay off your debt faster than you might have originally anticipated.

Instead of seeking an advantage through investing, I’d seek an advantage through saving. 

You can control your spending and saving to a large degree. Controlling investment returns, on the other hand, is much more difficult (we can’t control the stock market).

And so if you can make key lifestyle changes, you could see your available excess capital increase significantly. This money could then be used to aggressively pay off your debt.

Two things to think about here.

First, you may become comfortable with lifestyle changes that could benefit you for the rest of your life.

If you find that there are a number of (expensive) things you don’t really need in your life (that you currently have/own/pay for), this could cause a total paradigm shift in how you see life, money, and freedom.

Second, paying off debt faster will eliminate a cumbersome capital suck faster.

This will put you in a position to invest as soon as the debt is gone. And you can see, using my above real-life experience, what’s possible when you’re able to regularly direct a lot of capital toward investing in wonderful businesses.

As for key lifestyle changes, it’ll be up to you what’s possible and/or necessary.

But I can tell you that extreme output requires extreme input. 

In order for me to go from below broke to financially independent in six years, I had to get extreme.

I moved across the US back in 2009 (from Michigan to Florida) in order to make more money at my job, spend less, and pay less in taxes. I then moved to a smaller and cheaper apartment once I settled in. I sold my car, favoring walking and riding the bus. I severely capped my restaurant visits/spending.

Once the spending was pretty locked, I used my resources to make more money.

I worked harder than ever at my day job, leading to raises and advancement. I also simultaneously built a business at home (writing).

And this was all while doing the research necessary to invest and build the portfolio you now see, which led to an extra income source on top of everything else (via the growing dividend income I was generating).

Plus, I was tracking every single penny in and out of my life. This is something I do even to this day.

So paying off your debt faster than you currently anticipate can happen, John.

But using saving, rather than investing, as the platform for that could benefit  you both now and for the rest of your life.

Stocks aren’t going anywhere. And any lifestyle changes you could make in order to accelerate your savings and debt payoff will only likely lead to far more aggressive investment potential down the road, once you’re ready.

By the way, once you are ready for that next step (investing), we’ve got you covered with some excellent resources to help you further.

Fellow contributor Dave Van Knapp has written a robust series of articles on dividend growth investing that he refers to as his “lessons”.

Taken together, these lessons can educate novice and experienced investors alike on how dividend growth investing works, why it’s such a powerful long-term investment strategy, and how to implement it in one’s real life.

And I personally highlight a compelling long-term dividend growth stock investment idea each Sunday, as part of the Undervalued Dividend Growth Stock of the Week series.

These are free ideas presented to the investment community once per week. Every idea goes through a rigorous analysis and valuation, backed up by professional analysts.

No matter what you choose to do from here, John, it would behoove you to get started as soon as possible.

I wish you luck and success.

Jason Fieber

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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.