If you have debt, forget spending on things like fancy coffee drinks, says “Shark Tank” star Kevin O’Leary.
That’s because paying off debt is “key” to financial success, he says.
“If you have student loans, if you have debt, if you have things that you’re paying interest on, you have to pay those off first,” O’Leary says.
“You have to pay [debt] off first before you spend $4 on a cup of coffee. Why would you ever do that?”
It’s important to pay off debt, because the interest you pay on borrowing money can be expensive. Take credit cards: The average credit card annual percentage rate (APR) is 15.78%, and rates can go even higher depending on the borrower’s credit. For instance, the Chase Freedom® offers a variable APR ranging from 14.99% to 23.74%, according to CNBC Select.
Debt can also be a major obstacle in reaching other financial goals, like saving for retirement or making important financial decisions, including buying a home, O’Leary says.
“You’ve got to get rid of those [expenses] first, then you have the luxury of spending money on whatever you want. But not until you’re out of debt!” O’Leary says.
O’Leary often says spending on coffee, in particular, is “such a waste of money.” (“Coffee [can] cost you 18 cents to make at home if you want to. That’s where you should make it, and put it in some kind of a thermos and take it to work,” he says.)
But if it’s a luxury you want once you have the money, then “sure, you can buy coffee when you can afford it. Sure you can buy that extra thing you want or a new stereo or new jeans or new sneakers or whatever it is – all of that after you pay off your debt,” he says.
O’Leary says, personally, instead of spending his money on things like coffee, he prefers to invest extra cash.
“What I’ve learned to do, and what has really helped me in maintaining growth in my own personal investing is, anytime I pick up something I’m going to buy, I say to myself, ‘Do I really need this?’ Because if I don’t buy it, the money is going to be invested and make money every year for me while I’m sleeping,” O’Leary previously told CNBC Make It.
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”