December 3rd, 2008 — Debt, Dividends, Leverage, Personal Finance
When most of us hear the word dividends, we think about the easy life, of lying around on the beach while earning an insane amount of money. The cold hard truth is a lot less pretty. Dividends can pay, but unless you’ve got a lot of money invested, your returns are going to be pretty small. Let’s take a cold hard look at dividends as well as some alternatives that can help you achieve your goals in less time.
First off, dividends are a very nice little income. But, it’s important to emphasize that “little.” If you’re planning to retire and live off them, you’re going to need to have a very large fund or you’re going to have to really cut costs. Look at this way. Let’s say you have a divided that returns 2% interest. In order to make a measly $12k a year, you’re going to have to invest more than $500k. Not many people can live on $12k a year, no matter where they are from.
While it certainly is possible to find higher paying dividends, the vast majority are in this range. So, unless you’re sitting on a $500k nest egg, you’re going to need to come up with another way to secure your financial future. One of the best ways to do this is to leverage your debt.
But wait, isn’t debt a hideous thing that should be avoided at all costs? Well, in the strictest sense of the term, and using the traditional logic, yes, debt is not a good thing at all. But, let’s look at it in a different light. There is such a thing as good debt, debt that actually works for you instead of running you into the ground. It’s time to rethink what you already know about debt and get ready to change your perceptions.
Bad debt is debt that you rack up buying inconsequential things. You get used to having nice things and you keep buying, even if you don’t really need anything. Before long, you’re in over your head and you’ve got nothing to show for all of that debt. This is the most common kind of debt and the reason that it has earned such a bad reputation.
Now, let’s look at good debt. Good debt is money that you spend that will create returns for you. By using debt to make smart investments instead of silly purchases, you can start creating multiple streams of income. This is a lot better than buying stuff that you don’t even need. One of the most common types of good debt is a mortgage. Most of us don’t have the resources to go out and buy a house with cash, we need to go into debt to get it. But, it’s incredibly worthwhile and usually necessary.
Good debt can be leveraged in many different ways. You can use it to purchase investments and bonds that will help you secure your current income. You can use it to take advantage of new opportunities that will create solid streams of income. In a nutshell, good debt works for you by allowing you to start investing in your future.
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November 19th, 2008 — Diversification, Income Streams, Money, Personal Finance
Every single one of us would be thrilled to have more money coming into our homes every month. If you’re relying on one or two paychecks as the primary earnings for your income, you can relate that it’s pretty tough to get ahead. Everyday expenses chip away at our standard incomes and unless you manage to get a big promotion, chances are you’re going to be treading water for a long time to come.
How about, instead of just your regular paycheck, you were able to have several different income streams every month? That sounds pretty good, right? The main problem for many people is that they don’t have enough money to make new money. That old adage is more true than ever and if you don’t happen to be independently wealthy, it can seem as though you’re never going to break that cycle of living paycheck to paycheck and get ahead.
However, there is a very smart way that absolutely everyone can use to start making more money. While most of us are familiar with how debt works, it has gained a pretty bad reputation. We tend to look at debt as though it is an evil thing, and something that should be avoided at all costs. While this is true to some extent, especially if you are using your debt in the wrong way, there is a form of debt that is actually quite beneficial.
Good debt is debt that you leverage to create something. Bad debt is money you spend on credit for things that are completely useless. Let’s look at this way. You can go into debt to invest in a business or a stock, and then have it return your original investment ten fold, or you can go into debt to buy a flat screen television that is never going to do anything more than provide entertainment and collect dust. This is the main difference between bad and good debt.
Debt, when managed properly, is the key for many of us that want to make more money. Even the richest people on earth had to start somewhere. The best stories of the self made entrepreneurs always include the part where they had to get a loan, either from the bank or a friend, to invest in something they believed in. Years later that debt paid off big time in the form of millions of dollars. This exact same technique will work for anyone, provided you make smart investments and don’t overextend yourself initially.
To recap, debt is not necessarily the root of all evils, unless it is improperly managed. If you’re using debt to buy things you really don’t need, then yes, it’s going to be a problem if you overspend. However, if you are leveraging that debt into investments and opportunities that will create new streams of income, you are getting the benefits that so many entrepreneurs have already reaped to get where they are today.
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November 10th, 2008 — Debt, Leverage, Money, Personal Finance, Stocks, Wealth
If you’ve ever had a chance to invest in a great stock but didn’t have enough money put aside to take advantage of the opportunity, you know too well the agony of defeat. Most of us are under the impression that it takes money in the bank to start investing. If you’re not financially stable or independently wealthy, that means that you’re going to have to watch a lot of opportunities pass you by. Or does it?
There is a way that you can start taking those opportunities by the horns right now, before you have money put aside. Debt leveraging, when used properly, is an incredibly powerful tool that can really make the difference in your financial future. In most of us however the word debt conjures up some pretty unpleasant images. We’re all trained to think that debt is bad, that debt will ruin you and that debt should be avoided at all costs.
What if you were to change your way of thinking and embrace the fact that debt can be a very powerful tool? What if you stopped thinking of debt in only one light and realized that there are many different kinds of debt? We’re not here to tell you to run out and buy everything your heart desires, racking up all sorts of debt. That is why debt has such a bad reputation. The temptation to buy things we don’t need or can’t afford is pretty strong and millions of people end up falling into debt traps every single year.
That is mainly because they don’t use debt to make money. They use it to spend money and end up in way over their head. Instead of looking at debt in the traditional manner, we want you to start realizing that debt has the potential to change your future. You can use debt to start making those smart investments and start reaping their benefits right now.
Let’s say that you have the chance to purchase ten shares of a stock with your own money in the bank. It does well and you get a nice little payday. Wouldn’t it have been nicer to purchase ten thousand shares and retire? By getting a loan to purchase those ten thousand shares, you could have made more than enough to cover the costs of that loan and still retire. You can keep thinking small and making little returns here and there, but over time, they’re going to get eaten up.
If you want to make it big, you’re going to have to start leveraging debt in a smart way. We’re not saying get a loan and blow it on a non-performing risky stock. We’re saying, find the opportunities, research them and when you’re sure you’ve got a winner on your hands, go all in. Don’t waste your time with a few shares here or there. Get that loan, use options, and/or margin your portfolio to get more shares and get the benefits that debt leveraging can bring.
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