Debt usually has a bad rap.
So how can you use it to get wealthy?
Is there a rule of thumb when it comes to using your debt to accumulate
more wealth?
There is 2 types of debt, Good and Bad Debt
Good debt is the type that makes you money if invested
wisely, like real estate.
Bad debt is the type that does not add value to your life, like credit card debt.
So now that you know the types of debt, how can you use this to your advantage?
Invest in an asset
Although we usually consider an asset to be a property, an
asset can also be a car or other larger items from which you can derive future
benefits from.
Taking a loan to finance a property is always much better
than financing a vacation. On the flip
side, although financing a car won't make you rich, if you need a car to get
around and drive the kids, then this is a smart investment because it'll
improve your life.
The key however, is to invest in something from which you
will get a financial benefit from in the future. Land, homes, or businesses are the ways to
use debt in order to get ahead.
Use Good Debt to Pay off Bad Debt
What if you already have a lot of bad debt? Ever considered obtaining a Home Equity Loan?
This low interest loan which is secured by your property can help you pay off
your high interest credit cards and loans while paying almost half or less in
interest. Although you will still have the debt, more of your monthly payments
will go into paying your capital (debt) and less into the interest you
accumulate. This means you will pay off
your loans much faster.
Debt is a means to an end; it should not be controlling
your life. Use it as a tool to get ahead in life and achieve your financial
goals. This is why managing your debt
strategically is very important.