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Make Debt Work for You

Updated: Feb 17, 2023

The average American owes $52,940 in debt. Of that $52,940, $36,730 is from mortgage debt, $5,730 is from student loans, and $5,000 is from auto loans. Little wonder that money worries can be a major cause of stress.

However, it is important to recognize the differences between productive debt and unproductive debt.

Productive debt is debt used to purchase assets that appreciate over time or debt used to increase your own productivity. For example, if you acquire a mortgage to put a roof over your head or invest in an apartment building using debt, real estate prices typically increase over time and that builds your wealth. Or, if you obtain a graduate degree, you can increase your productivity and income. Productive debt ultimately increases your net worth when managed appropriately.

Unproductive debt ​is often used for purchasing possessions. For example, while items like a new car and furniture may spark joy they typically will not appreciate in value. The worst kind of debt is credit card debt because of the ultra high interest rates, so think twice before charging a vacation or using a line of credit to gamble in Las Vegas.

young father with toddler on back reaching for something on the table, man on the phone holding credit card
Productive debt is debt used to purchase assets that appreciate over time or increase your own productivity.

The Link Between Stress and Health

Humans have an innate response called “flight or fight.” It is nature’s way of launching our bodies into action during moments of stress. Faster heartbeat, accelerated breathing, tightening of muscles, and increase in sweating – these are all physical responses we may feel in stressful situations. These are response mechanisms that prepared our ancestors to run from, or confront, a danger on the savanna. But they can be less useful in more modern times.

In the short term, stress can manifest itself in physical symptoms, such as headaches, fatigue, difficulty sleeping or concentrating, an upset stomach, and general irritability. These brief episodes of stress usually do not cause lasting harm to personal health.

However, debt — and the stress it causes — is often a persistent challenge. If your stress system stays activated over longer periods of time, it can lead to serious health problems, such as weight gain, fatigue, anxiety, depression, headaches, and sleep problems.

Managing Stress and Debt

If you are experiencing debt-related stress, you should consider attacking the root of the problem. While it may take time to work down debt, that doesn’t mean you can’t manage the stress during the interim period.

Begin by developing a strategy to eliminate debt and keeping your debt in perspective.

Develop a Strategy

Developing a strategy to eliminate your debt is the first step to lowering stress. The sense of control that a financial plan gives you can furnish you with hope and optimism.

At Peak Wealth Planning, we work with our Illinois and Colorado clients to help them allocate cash flow to create a plan to build wealth while reducing or eliminating their debts. In some cases, the plan is to keep student loans for a long time so a client can prioritize retirement savings. In other cases, a client aggressively pays down a mortgage to shield a home from creditors or have the peace of mind of being ‘debt-free’ upon retirement.

Gain Perspective

It’s important that you keep your debt concerns in perspective. Remind yourself that debt is a tool and is not necessarily permanent. Sometimes debt brings great rewards, like profits on an apartment building or a $50k raise after finishing your MBA. Writing in a journal can be helpful as an outlet to the worried thoughts that can cycle endlessly through your mind.

Ask your financial advisor to track your net worth each year to monitor progress in paying down your debt. Seeing that progress can bring you joy and satisfaction.

Final thought.

Do you have written financial goals? Is stress causing you to re-think your investment strategy? Are there significant changes happening in your life?

Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as at their Colorado location near Denver, Winter Park, and Fraser.

If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you.

Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future.

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About the Author

Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.

Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.


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