9 Ways To Get Debt-Free While Preserving Wealth
Written by
Cindy Lamothe
Edited by
Levi Leidy
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Is it possible to hold on to the wealth you’ve built while staying debt-free? Experts say you can absolutely do it — as long as you use a multifaceted approach.
According to Abid Salahi, finance expert and co-founder of FinlyWealth, it’s about paying off debts and strategically allocating resources to ensure long-term financial health. “Our data shows that clients who follow a balanced approach typically reach their debt-free goals 30% faster while maintaining a 15% higher net worth than those who focus solely on debt repayment,” Salahi said.
Below, experts share their key strategies to go about it.
Prioritize High-Interest Debt
The first step is to tackle high-interest debts aggressively, said Salahi. “Credit card debts, which often carry interest rates of 15%-20% or higher, should be your primary target.”
By focusing on these, he said you earn a guaranteed return equal to the interest rate you avoid. “For instance, paying off a $10,000 credit card debt with an 18% APR is equivalent to earning an 18% return on a $10,000 investment, which is hard to beat in any market.”
Andrea Woroch, nationally recognized consumer finance and savings expert, agreed that you should pay off high-interest debt as quickly as possible. “Carrying a revolving balance on a credit card will kill your chances at building wealth thanks to the extremely high interest fees you pay each month,” she said.
She advised paying as much as you can each month to shrink this debt or use a balance transfer card that will give you up to 21 months to pay it off with no interest accruing, saving you more over time and helping you get out of debt faster.
“Compare balance transfer cards at CardRates.com to find the one with the longest no-interest term. The sooner you pay off debt, the sooner you can start using your money for wealth-building investments,” she said.
Leverage Debt Consolidation Wisely
Debt consolidation can be a powerful tool when used correctly. “By consolidating high-interest debts into a lower-interest loan, you can save thousands in interest and pay off your debt faster,” Salahi advised.
However, he warned that avoiding the common pitfall of racking up new debts after consolidation is crucial.
“Through strategic consolidation, I’ve seen clients reduce their total interest payments by up to 40%.”
Build an Emergency Fund
Saving while paying off debt might seem counterintuitive, but an emergency fund is crucial for long-term financial stability.
Salahi recommended aiming for three to six months’ worth of living expenses. This buffer prevents you from accumulating new debt when unexpected expenses arise.
“In my experience, clients with adequate emergency funds are 75% less likely to fall back into debt after becoming debt-free,” Salahi said.
Invest Strategically
“Don’t put all your eggs in the debt-repayment basket.” Salahi suggested allocating a portion of your income to investments, especially if your employer offers a 401(k) match. “At a minimum, contribute enough to get the full match — it’s free money. Beyond that, consider low-cost index funds for long-term wealth building.”
He added, “Over the past decade, I’ve observed that clients who maintained a balanced approach of debt repayment and investing had an average net worth growth of 8%-10% annually, compared to 3%-5% for those who focused solely on debt repayment.”
Use the Debt Avalanche Method
For multiple debts, Salahi said the debt avalanche method often yields the best results. List your debts from highest to lowest interest rate. Pay the minimum on all debts, but put any extra money toward the highest-interest debt. Once that’s paid off, move to the next-highest.
“This method minimizes the total interest paid and can shorten your debt-free timeline significantly,” Salahi said. “I’ve seen clients save up to 20% on total interest payments using this method compared to other approaches.”
Increase Your Income
Look for ways to boost your income, whether through a side gig, freelancing or asking for a raise. Then, dedicate a large portion of this extra income to debt repayment.
“One of my clients started a weekend consulting gig and applied 80% of the earnings to debt repayment, becoming debt-free 18 months earlier than initially projected,” Salahi noted.
Tame Impulse Spending
“Don’t overlook how small unplanned purchases can drain your monthly budget,” Woroch said. “Why work harder to afford frivolous purchases when you can simply cut back on unnecessary spending?”
She went on, “A report from SlickDeals found that the average consumer dishes out over $150 per month on impulse purchases and many of these impulse purchases are likely due to triggers you’re not even aware of.”
To curb impulse buys, she recommended spending time identifying triggers that lead to unnecessary purchases and coming up with ways to combat them. For example, if you can’t resist a sale, she said to turn off push notifications in deal apps and unsubscribe from store newsletters.
“Instead, look for discounts for items you actually need and use a browser tool like Sidekick from CouponCabin.com that automatically applies coupons to your cart to avoid further temptations when hunting down a sale,” she said.
Practice Mindful Spending
“Develop a budget that aligns with your financial goals,” Salahi emphasized. Track your expenses and identify areas where you can cut back without significantly impacting your quality of life.
“Many of my clients find they can reduce their monthly expenses by 10%-15% simply by becoming more aware of their spending habits.”
Regularly Reassess and Adjust
“Your financial situation and goals will evolve,” Salahi said. “Schedule quarterly financial check-ins to reassess your progress and adjust your strategy as needed.”
This habit helps ensure you always optimize your approach based on current circumstances.
“By implementing these strategies, you can work toward becoming debt-free while simultaneously building wealth. It’s not about choosing between the two but finding the right balance for your unique financial situation.”
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