A Different Way to Look at Debt

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The majority of 'financial gurus' will give you the financial advise that in order to become rich you should work hard and pay off debt.
They believe that all debt is bad and that the less debt you have the better.
However, sometimes this is not the case and the advise of 'get out of debt' can be extremely limiting and can actually STOP someone (like yourself) from becoming rich.
In order to get rich you need to understand the different types of debt, and you then need to use the good kind to make yourself rich.
The two types are: 1.
Bad Debt - This is the one that you have to pay for, that takes money out of your pocket each month in repayments.
Usually credit cards, personal loans, car loans or home loans.
2.
Good Debt - This is the one that puts money into your pocket, that earns you money that you wouldn't have been able to earn otherwise.
Eg.
Debt from purchasing a positive cashflow property where rental income is great than all expenses.
The thing that determines the good from the bad is the effect it has on your cashflow.
The good adds to your cashflow each month, the bad takes away from your cashflow each month.
Good debt makes you richer and richer, bad debt makes you poorer and poorer.
In order to look at debt in a fresh way you need to look at your debt in terms of cashflow, not in terms of the overall figure or net worth.
So instead of saying "I have $20,000 of debt" say "My debt costs me $100/week".
By looking at debt in this fresh way (looking at cashflow instead of the figure) you can begin to see whether your debt is good debt or bad debt.
For example if you think all debt is bad then when someone says pay off all debt you will agree with them.
But if you look at your debt and you see that your $20,000 of debt is making you $1,000/month, then the advise to "pay off all debt" is stupid advice.
By looking at debt in terms of cashflow you can become financially free quicker and you can easily reduce the stress of your debt.
Me and my wife have around $20,000 of personal debt from before we got married.
That figure "$20,000" is quite overwhelming for us.
But by looking at debt in terms of cashflow we can then see that our debt is currently costing us $100/week.
By looking in terms of cashflow I have shifted my thinking and am now looking at ways for our debt to cost us $0/week.
Then it will have no effect on our cashflow and we can keep it as long as we want.
If I just looked at debt in terms of the figure I would be extremely stressed and you miss opportunities to make money while I was busy paying off my debt.
I am not a financial advisor and this email is purely to educated and to get you thinking.
Don't take this email as advise for your personal situation.
I am not saying that you should rack up loads of consumer debt if you can make it so that it costs you $0/month.
I just want to offer an alternative to the way everyone thinks about debt and money.
Let me share with you my method of getting rid of my debt so that I will become rich in the process: 1.
Minimize bad cashflow from my debt - Lower the cashflow from my debt for $100/week to about $10 through different financing options and lowering interest rates.
2.
Use the money I would have used to pay off debt to buy assets - Instead of paying $100/week I am only pay $10 per week so I have $90 per week left to invest in assets that generate an income for me.
For me those assets will be positive cashflow real estate.
3.
Allow my assets to cover the costs of my debt - Because my assets are making money each week I can then use that money to offset the costs of my debt.
My debt now costs me $0.
4.
Allow my assets to pay off my debt - Inflation causes the income from my assets to go up, while my debt repayments stay the same, so over time I can make extra repayments onto my debt from the income my assets are generating me.
5.
Have no debt and a bunch of assets - At the end of it I have paid off all my debt without working hard for it, and I now how a bunch of assets that are STILL generating me money every week.
So I am now richer than before.
If I was to just pay off my debt then I would have worked really hard and paid off my debt, but I would have nothing to show for it at the end of all my work.
At least this way I end up with no debt AND assets that generate me income.
So think about your debt in terms of cashflow and think about ways you can cause your debt to cost you $0/week or even make you money.
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