August 25th, 2008 — Banking, Debt, Financial Security, Leverage, Money, Personal Finance, credit cards, credit score, retirement
Whether you are pushing thirty and trying to get your first home or your retirement is staring you in the face, there are times when you may feel as though you’ve run out of time financially. We don’t always make the best decisions when it comes to saving money and before long, we end up wondering where it all went wrong. If you’re trying to figure out how to catch up financially here are a few tips to get you started on the right track.
1. Fixing your credit.
First and foremost, your credit should be your main focus. This will make a big difference in whether or not you are able to get any kind of loan and it is always good to have as high of a score as possible. If you are below 600, there are plenty of things that you can do to improve that score. You’ll need to start by paying off any delinquent accounts. Then, open up a secured credit card or get a small loan and make regular payments. In six months, your score can jump as much as 80 points or more.
2. Putting money aside.
If you’re already in a financial bind, putting money away can seem impossible, but it’s not. There are a few ways that you can start saving money right now, even if it is only a little bit. Place it in a high interest bearing savings account to get the most out of your money and add to it as much as possible. Some nest egg is better than no egg at all, and every little bit does help.
3. Consider debt leverage.
In this situation, when you need to start getting more money in to secure your future, debt leverage may be the best choice. If you are not familiar with how this process works, you basically take out a loan and invest that money. Whether it is into stocks or even real estate property, the idea is to have it start earning money for you. This is a good kind of debt and one that can mean a big difference when it comes to retirement. If you don’t have a savings account, you’ll need to have an alternative source of income coming in that will last through your older years.
4. Realize that it is never too late.
Many people make the mistake of thinking that there isn’t any point in turning things around. It doesn’t matter how old you are, or how bad your situation may be. There is a way out and you can turn your financial life around. Never give up, find new ways to make more money and hang in there. By sticking it out, you will be able to start securing your financial future, one dollar at a time. It’s not the quickest way, but it will work, provided that you dedicate yourself to wise spending and investing.
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August 22nd, 2008 — Book Review, Debt, Income Streams, Leverage, Money, Personal Finance
On the surface, this book seemed like the ideal read. It has a strong premise of how to create multiple streams of income using debt leverage. That is a great premise and one that we follow and put into practice every day. It was such a disappointment that this book failed to deliver on such promise. We really wanted to like this one, but at the end of the day, we simply cannot recommend it.
Let’s go into the good things first. Those who are new to real estate investment will get a lot of information from just the few chapters. The book covers 1031 transfers in a way that makes them so easy to understand. So many books try this and can’t even do that in 200 pages, let alone in a few chapters, so this is a definite plus for this book. They also cover some really great advice on how to actually make money with your mortgage.
The basic premise is that you take out a Smart Loan, using ARM payments. Make only the minimum amount and use the money that would have gone into higher payments into a high interest account. Sounds great on the surface, but it is obvious that the authors thought that the age of low interest rates on ARM loans was going to last forever. That’s simply not an intelligent way to think – the markets have already proved this many times over.
We fear for those that took this advice to heart and are now trying to figure out how to keep their homes. While debt leveraging is a terrific way to make money, and create more than one stream of income, it should never be done in a risky manner. It’s one thing to take out a loan, it’s another to think that interest rates are never going to skyrocket. By far, the best idea is a fixed rate loan, even if it means you’ll be making a little less money. You’ll more than make it up compared with what would happen when your ARM rate explodes.
We would have liked to have seen more than one option mentioned in the book, and it would have made it easier to offer at least faint praise. However, by only providing readers with one option, the authors failed to provide smart advice on smart loans. They always fall back on relying on that ARM to stay low, and this is a mistake that only amateurs make.
While this book is definitely not advice anyone should follow, debt leverage is still one of the best ways to make extra money. However, the key is finding the SMART way to do it an minimizing your risks. There’s no point in going to all of that trouble if one change in the market could drastically affect your fortunes. The book had a lot of promise, but at the end of the day, it simply failed.
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July 31st, 2008 — Debt, Diversification, Financial Security, Income Streams, Investing, Leverage, Money, Mortgage, Personal Finance, Real Estate, good debt
Not all of us have had the luxury of spending the last 20 years to secure our financial future. Most of the time, through no fault of our own, putting aside money for retirement takes a back seat to handling emergencies or schooling for our kids, or simply the daily expenses of life. If you’re looking down the barrel of 65 and you don’t have anything put aside yet for your retirement, don’t worry. It’s never too late to start planning for your retirement. It may take a little extra work, but you can secure your financial future.
Let’s look at one of the best ways to ensure that you’re going to have a steady income coming in after you’ve retired. Millionaires across the world have used this technique for centuries to produce multiple streams of income. When you are no longer reliant on your 401K, or even your social security check, you’ve got a lot more freedom and a lot less worry.
This technique is called debt leveraging. Simply put, you got into a little debt in order to create a new stream of income. One of the easiest ways to illustrate this is through the purchase of a new second property. Let’s say that you find a great deal on a house that is in pretty decent shape. It’s in a good neighborhood and it’s close to good schools. You don’t have the money to buy it outright, but you don’t want to let this chance pass you by.
You can go to the bank to get a mortgage on that property and then start renting it out. Make sure that the monthly rent exceeds your monthly mortgage payment. Now, you’ve got a new stream of income coming in and you’re really not working for it. If you clear an extra $1500 a month, that’s an extra $18,000 a year on top of what you’re already making – and that’s just for one property.
Now, multiply that by a few properties and you’re making enough to really start planning for your retirement. However the key of good debt leverage is to make sure that you are not too heavily invested in one area. You’re going to want to change things up a bit to make sure that if something goes wrong you won’t take a big financial hint.
In addition to that rental property, you could put some of the profits you’re making or even get a new debt loan to put money into a high interest bearing account. Now, you’ve got a second stream of income coming in that will shore up your financial defenses. You can just keep perpetuating this until you are making enough every year to easily put aside quite a bit of money for your retirement. The best part is, this money will continue coming in, even after you’ve left your regular job. The key to a happy and fruitful retirement is having multiple streams of income that keep paying off, even when you’re not working.
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July 8th, 2008 — Debt, Financial Security, Income Streams, Investing, Leverage, Money, Personal Finance, bad debt, good debt
Let’s face it, debt has managed to earn itself a pretty bad name in most circles, but in many cases, this stigma is undeserved. Debt, when used properly, can help you secure your financial future. While no one is arguing that improperly used debt is a bad thing, good debt is possible. Commonly, good debt is synonymous with leveraged debt. This refers to the process of using debt in order to create multiple streams of income. You have to spend money to make money and unless you happen to have a bunch just lying around, you’re going to need to go into debt at first in order to secure your future.
There are many benefits that can come from leveraging your debt in order to create multiple streams of income. By going into a little amount of debt, you can take advantage of opportunities that would otherwise not be available to you. Only the independently wealthy have the capability of writing big checks for investments. But they all had to get their start somewhere. No one starts off with everything, you have to work to get it. How many stories have you heard of immigrants with a few cents in their pocket that turned it into an empire? Somewhere along the way they had to go into debt to get the capital they needed to make all of that money.
You can use this same proven formula in your own personal finance. You don’t have to be a financial genius and you don’t have to be wealthy to start making money right now. One of the best ways to illustrate this point is investing in the stock market. Let’s say that you have the opportunity to purchase shares in one of the hottest new companies. You’ve got a little saved away, but it will only purchase you a handful of shares. However, if you were to take out a loan, you could easily buy numerous shares. When these returns start to come in, you’ll have a much larger return, simply because you were able to invest more.
This is one of the main benefits of using debt leverage to secure multiple streams of income. You wouldn’t normally have the opportunity to make large investments that will have larger returns. While you can certainly play it safe, it simply makes more sense to take that small risk for the larger return. If you manage your finances correctly, this won’t be a big sacrifice to you. We’re not saying run out and get into debt over your head in hopes of becoming a millionaire.
You need to manage your debt effectively if you want it to work for you. That means starting off with one stream of income and then when that starts to return, leveraging a little more for the next opportunity. Soon, you’ll have numerous forms of income coming in that will more than cancel the debt you got into to start the whole process.
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July 3rd, 2008 — Book Review, Debt, Leverage, Money
Marian Snow’s book had a lot of promise. First, it discusses equity harvesting and how to get the maximum amount of equity out of your home without being taxed on it. Second, it discusses how to use that money to make more money. Sounds great on the surface, but this book failed to deliver and ended up being a major disappointment. The subtitle: How to Safely Leverage the Equity Trapped in Your Home and Transform It Into a Constant Flow of Wealth and Security seems a bit macabre now, in the wake of the housing crisis and one wonders how many people are regretting that they ever picked this book up.
Let’s start with first things first. The author is encouraging people to “free” all that nice equity in their homes and put it into something that will actually earn money instead of depreciate. Sounds good – but can be risky if you don’t pick the right investments. Quite honestly, leveraging the roof over your head is never a solid idea, especially if you only have one stream of income. Lose your job – and poof – there goes your house. But, so far, so good with the book.
It’s the next part that lost me. The author wants readers to pull out their equity and invest it into this wonderful, magical tax-free fund that will reap huge rewards, and produce it’s own sunshine and lollipops. (Ok, maybe not the last two.) Keep reading and you’ll find out that this wonderful mythical fund is nothing more than life insurance. The book did provide an interesting study into a theory I’m developing however.
Books that encourage readers to harvest equity and place it into a magical fund usually wait until the absolute last second to reveal it’s nothing more than life insurance. Slap a different title on any one of them and you basically have the same book. That pretty much blew the whole premise for me from that point on. The main problem is that there simply isn’t enough of a return to warrant risking the equity in your home.
Whenever you’re using debt leverage to create a new stream of income, you’ve got to make sure that the return is going to be worth the risk. Given that tax laws could change at any time for insurance funds, this is a hair raising prospect that any smart home owner should avoid – at least for now.
There are dozens of other ways to leverage debt into multiple streams of income and they don’t include life insurance funds. While there is some benefit to investing in these funds, it’s never a good idea to go whole hog. You’ve got to diversify. Any fifth grader that sat through a basic course on financial planning would understand that.
Overall, I cannot recommend this book. It unfortunately gets thrown in the pile with the numerous other books that all promise big returns and end up selling you life insurance – sort to speak.
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