Debt to wealth
Where to start?
When coming to the point where you have to save money for your down payment, a good practice would be to assess your overall debt situation and think how you can transform Debt to wealth.
Do you know that Australian pay around 50 billion in credit card debt alone? to that you do need to add the household mortgage debt which was at the end of 2013 at $1.84 Trillion, it’s very hard to transform debt to wealth when you are covered with a mountain of debt.
You must understand your debt comes from your way of living, if you are living above your true means, and use credit to finance that, not only that you are heading for destruction, you are jeopardising your current situation, which means, if you would have been categorised as level 5 income earner, now you are going to go down to level 6-7, because you willingly pay more on an item than it’s stated price (because you need to pay interest as well), in other words, when you are reading that a CEO of a bank get new bonus worth millions it’s all thank you, as you so easily mortgage your future and destroyed your wealth building muscles, you have strengthened the banks muscles, and made them, even more, rich and that is why you need to change the way you think and go for: debt to wealth process.
The first step to stop this catastrophic situation and move from debt to wealth is to cut all your credit cards, because you need to stop adding debt, (the business term is throwing good money after bad) even if you think it’s crazy now, if you care at all about yourself and your future you must do this – go to cash = debit card!!! this part will boost your debt to wealth strategy from bottom to top.
The second step is to pay off your credit card debt from the highest interest card to the lowest – you see if I would tell you that I can show you a no risk investment that will yield up to 22%, would you invest in it? of course, because the nominal Australian risk-free interest is 2.5%, almost tenfold more, with zero risk!!! there are Australian out there who pay more than 22% on their credit card debt! if they just eliminate this debt, they will get the money worth 22% yield back! does this make sense, but that’s not all they will get 22% and the 4.5% they could have got if they instead of paying debt invested the money in a low-risk CD.
When you finish paying the first card, take all that monthly payment and pay the second rate debt, speeding the payment up! and so on until you are debt free as fast as you can. by doing that you can start using this money to invest at an investment that suit your age and risk appetite that will form your wealth and help you create a much, much better future.
Do you know how long you can survive without a paycheck? the average time for a person with debt is 2 month, after that the bank will no longer be your friend. people with debt can’t see anything long term, they can’t think clearly, and probably they don’t sleep that good at night. stop be this person you deserve a better life, nothing is worth risking it all for a short term happiness.
The third step is to take all the funds that you use to pay off debt and invest them (using your personal appetite for risk) and see how instead of losing everything you build wealth and create a better future for yourself, or better put, go from debt to wealth.
The fourth step which is vital to your debt to wealth transformation is to examine every expenditure you make and assess it on a two-scale table, dividing it between the wants and needs.
Needs are a thing you can’t do without – food, electricity, water, and the basic needs like household expenses.
Wants are thing that are nice to have, like a new car, a new stereo and so on,
Debt to wealth conclusion:
you got to understand your things to say nothing about you, if you can’t afford them in cash, you can’t afford them at all, you must think long term of the value that new item will bring to your life, and take into consideration the loss of wealth power that is inherent within every buy, because any $1 dollar spent is a loss of about $3 dollars invested!!! just do that math and you’ll be on the fast trek for success. do not live in the present, it will bring much grief to your life in the future, as we all live longer and need to pay for this way of living.