On the surface, this seems like an oxymoron. How could you possibly use debt to create more money? It actually isn’t an oxymoron, but you’re going to need to change your perception of debt and classify into two different categories for this to make sense. There are many ways that going into debt can actually end up securing your future, just as there are many ways that going into debt will ruin your future. Let’s look at both to discover how to turn your debt into wealth.
First, let’s discuss the kind of debt that you are probably most familiar with. Bad debt is the kind of debt that most of us get into after overspending on things that we really don’t need. It’s easy to get caught up in commercialism and want to have all the things that we think we deserve. Many of try to live like millionaires on a small percentage of their budget. With poor management, debt quickly grows out of control and before long, we find out that we are in way over our heads. Bad debt is very common, especially among people who are just starting out and have yet to learn this very valuable lesson.
The second kind of debt is much different. This is the kind of debt that you use to invest in something. The first kind of good debt you’ll probably get into is your home. While it really doesn’t have many measurable returns, unless the property value increases, it does have emotional returns and serves as a good lesson in how using debt can help you get better off in the long run. Think of this as an introduction in how to use debt to grow wealth.
There are many ways that you can leverage your debt to start creating alternative streams of income. For example, let’s say that you are living paycheck to paycheck and you have the opportunity to invest in a stock that is destined for greatness. You may have a couple of bucks put aside, but it’s barely enough to buy one share. You can let this opportunity pass you by, or you can leverage debt to help you take advantage of this future stream of income.
What’s better – going into a little debt to reap big returns or spending the rest of your life wishing that you had the money way back when before that stock took off? Managed properly and used for the right reasons, debt is a very powerful tool. If you want to make money, you are going to have to have money. Unless you came into this world with a silver spoon and a trust fund, chances are you don’t have a lot of it just sitting around. That doesn’t mean that you can’t become wealthy.
By leveraging debt and using it well, you can easily achieve your dreams of greatness. Just make sure that you don’t overextend yourself or make bad decisions.
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Originally posted 2008-11-18 05:58:34. Republished by Blog Post Promoter
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bad debt, Budget, Debt, Diversification, good debt, Leverage, Money, Wealth
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4 comments ↓
Absolutely, that is the best way to use debt to move forward. I have an opportunity.
I am looking for a Money Guy. I have a great lead for a Underperforming Apartment Complex. I will do the re-hab, Manage, Season It, and we can sell the property in 2 or 3 years and split the profits.
@Paul
I wish you the best of luck…
I am not into funding projects pitched to me over the Internet from an unknown person, but I do appreciate your enthusiasm.
Perhaps we will meet some day through my trusted channels.
[...] They both provide fuel. Good carbs provide your body with the fuel it needs to function. Likewise, good debt provides your finances with the fuel to [...]
Yes, debt can be used to build wealth, but it needs to be used very CAREFULLY. If you overleverage yourself with cash flowing real estate, you can find yourself in a lot of trouble fast if something goes bad. You need to make sure each property you buy not only covers it’s own monthly expenses, but it also generates enough cash to pay for a new roof or siding in ten years plus the many other unexpected things that can come up. If you don’t plan for these expenses, they can cause you some serious problems down the line.
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