Saw this on Facebook, and my first reaction was “No shit!” Mark Cuban, billionaire owner of the Dallas Mavericks and host of Shark Tank, was interviewed by Business Insider and asked about what he wished he knew about money when he was in his 20s. Here’s his response:
That credit cards are the worst investment that you can make. That the money I save on interest by not having debt is better than any return I could possibly get by investing that money in the stock market. I thought I would be a stock market genius. Until I wasn’t.
I should have paid off my cards every 30 days.
This seemed like the most obvious personal finance advice ever. And coming from a man like Mark Cuban, I expected something more profound. The importance of saving, various investment strategies, taking risks…each of these seemed more worthy of advice from him. But avoiding credit card debt? We don’t normally associate billionaires with credit card debt. Sure, they leverage themselves in real estate or other business ventures. After all, the man was a millionaire by the time he was 32, and a billionaire at 41. Hardly the type of person to lament too many lattes at Starbucks.
But then I thought about it, and it made more sense. First, credit card debt is absolutely crippling to one’s financial future. The average credit card debt load in the U.S. is over $15k. Obviously, if you owe that much you’re probably just paying the minimums. This article from Lifehacker does a good job of showing how long it takes to pay down debt this way. It is terrible. So maybe if Mark Cuban is warning people against it, they’ll listen.
Secondly, if you have a high amount of consumer debt, that eats up a good portion of your cash flow. You need to consider the opportunities that this debt prevents you from accepting. Maybe a friend has a solid business idea and is looking for investors. Maybe you want to get serious about contributing to your roth IRA. Maybe you’ve had a dream to quit your job and write full-time. If you’re carrying a heavy load of debt, this becomes extremely difficult. The combination of high interest rates and low minimum payments makes them a disaster. You can’t accept these opportunities with that debt hanging over your head.
I myself used to carry a LOT of credit card debt, and it took me several years to pay it all off. During that time, I had to forgo several opportunities. It killed me to think that not adhering to a budget and spending beyond my means was impacting my present and future happiness so much. I vowed to not carry that balance anymore. Like Mark, I sure wish I had listened to the advice of others and not gotten into that situation in the first place. Sure, the debt and payments are awful, but what it prevents you from doing is even worse.
While it wasn’t the advice I expected to hear from someone of his stature, it definitely makes perfect sense and is advice we should all consider.