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First step to building your wealth - Reduce Bad DebtsLearn the first step of building your wealth, you must know "debt". Some people will tell you to "reduce your debt", "don't owe any money." A millionaire knows that is not always true. He knows there are different kinds of debt. They are able to differentiate Good debt and Bad debt. You too, start indentifying them. This concept is easy to grasp, not rocket science, just pure common sense.
To start building your wealth. You need to be cautious about debt. Firstly, identify which is the "Bad debt." The most basic form of bad debt is Credit Card debt. Most young people fall into this trap by making spontaneous purchasing choices. Often these decisions force them to file for bankruptcy because they enter into a cycle of “borrow and owe.” Stop working for the bank A millionaire in the making knows that this is not the way to go. Consider this, a credit card with a 24% annual interest rate can cost you thousands of dollars each year if you carry a revolving balance. If you max out your credit card of $30,000, and you are just making the minimum required payment each month, you will not be able to make any headway with your debts. The majority of your payment (over $600 per month) would be going exclusively toward interest. This is an example of "Bad debt", or I shall say this is a "Very bad debt" If you are in debt, you may want to get help from professional, who can explore budgeting options and formulate a specialized plan for safely paying your debts off. I found Solve you credit which provides access to several professional credit advisors, free of charge. Examples of bad debt Another example of Bad Debt is having a personal car loan. I'm not advocating that you should not buy a car. But most cars depreciate significantly in value with each passing year. On top of that you must realize that overall interest that you pay on your car loan, carries a significant cost. So that in the end you are paying for an expensive vehicle that is worth far less than what you actually end up paying for it. There are people who will change a new car every 2 or 3 years, getting into a new debt every 2 to 3 years. In reality the total interest that you end up paying at the end of your loan term may have allowed you to buy a 2nd car. How can someone be a millionaire when they continue getting themselves into Bad debts? Building your wealth is not tough once you get the bad debt settled. Learn to take advantage of Good Debt After sharing about "Bad Debt", let's talk a little bit about "Good Debt". Bad debt usually is incurred for consumption, Good debt is incurred for better investment or opportunities. If you have an business opportunities that can give you a Return on Investment of 20%. You can afford to take a business loan (interest rate of 6% - 8%) to fund the business venture. Another example of Good debt would be purchasing a piece of property to rent out. You pay 10% of the total cost, and finance the remaining 90% through the bank. Build your good debt The rental you collect should cover your mortgage payment and give you a positive cash flow. By structuring the deal properly you end up paying only 10% and your are able to let your renters essentially purchase the property for you. Warning: Please ensure you have amass a vast amount of knowledge before you move into Good Debt. Debt is a double edge sword, it can help you to grow your wealth in a shortest possible time, but making rash and uneducated choices you can also end up destroying your financial solvency in the shortest possible time. Millionaires know a good knowledge of both Good debt and Bad Debt. They spent lots of time to study on making use of Good debt to assist them to build their wealth. You too, can use debt as a tool in building your wealth, but before you do that, learn how to do it right. Next to the way of wealth. Learn a simple secret to wealth.
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