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Debt to Wealth
Going From Debt to Wealth by Focusing on Wealth
Turning Debt Into Wealth | Credit Debt Relief
To many people the phrase debt to wealth sounds like nothing more than wishful thinking. You may think that turning debt into wealth might just not be possible because you cannot even fathom how to get out of debt. However, transforming debt into wealth, like any other challenge, is a step by step process that can be overwhelming when looked as a whole but in reality is very doable if the will is there.
|“It is human nature to want it and want it now; it is also a sign of immaturity. Being willing to delay pleasure for a greater result is a sign of maturity. However, our culture teaches us to live for the now. “I want it!” we scream, and we can get it…”
- Dave Ramsey
Debt is the total opposite of wealth; it’s possibly the major thing that will prevent you from building wealth. However, debt, when used appropriately and responsibly can be used to create wealth – such as in a loan to buy a well selected investment property or home, or a loan to start or expand a business, maybe even some types of student loans.
This could be called “good debt” if it is used to purchase something that will increase in value or produce income and used responsibly. But be careful with that designation because at its core it’s still debt.
On the other hand there are types of debt that are structured in such a way as to make it harder for you to eliminate them and can even keep on increasing. This type of debt, known as consumer debt, is debt incurred usually for the purpose of consumption.
Consumer debt includes: credit cards, auto loans, payday loans, home equity loans used for consumption instead of investing, title loans, some types of mortgage loans (when used to buy more home than you can afford), buying things on monthly payments rather than cash purchase, and so on.
When is my debt too much debt? Do I need credit debt relief?
In her excellent book, The Road to Wealth, Suze Orman provides a great rule of thumb:
If for the exception of the good types of debt mentioned above you cannot pay off all of your debt right now (with the exception of mortgage and cars) then you probably are in trouble with debt or headed that way...
I agree with this because I have been there…
That leads to what I think is often the most overlooked aspect of the debt to wealth transformation: debt is not the problem, it is a symptom
Debt to Wealth: Identifying the Problem
Here is where you start transforming debt into wealth. Identifying the problem that got you into debt to begin with is the first step in turning debt into wealth. From experience and research these are some of the top causes for excessive debt:
- The consumerism-materialistic mentality. We are constantly exposed to a lot of social conditioning input that leads us to believe that happiness and success equal more…more stuff, bigger house, fancier car, better things, etc. In turn this is paired with easier ways to have that stuff now even if you don’t have the money for it.
- Vanity or keeping up with the neighbors. When you are surrounded by neighbors, family members or friends who either have or do things that cost money there is a natural tendency to go along. If you have children, they will like to do or have the things that their friends have and we as parents do not like to deny them many things. But trying to base our spending on what others spend is dangerous and it even happens unconsciously.
- Lack of education. For example, I have seen people whose home was foreclosed because they could not afford it when their payments went up. They did not know their payments were going to go up even though it was stated somewhere in their mortgage contract. Transforming debt into wealth requires knowledge and education of money, financial products and how they work.
- Personal financial planning and money management skills. Are you spending more than you earn? By not keeping track of that card or not knowing how much you spent this month vs. how much income you have had or whether your investments are doing as good as they should, etc.
Budgeting, paying yourself first, tracking your net worth and investments…these are all skills that can be acquired by anyone, they are developed through conscious effort, education and just caring about your finances.
- Lack of an emergency fund. Everybody runs into unexpected expenses, that’s normal, but not having and constantly saving towards an emergency fund will force you to rely on credit when the emergency happens.
- Lack of insurance. For your car, your health, your house, etc. Being uninsured or underinsured when something goes wrong can create a lifetime of debt.
Debt to Wealth Solution: Focus on Wealth not Debt
This is a different approach to turning debt into wealth than what you usually hear. The reasoning is that it will be more beneficial to eliminate debt by focusing on creating wealth that you can then apply to eliminate that debt. That way you create the habits of wealth building first and then eliminate debt.
The following links will explore in detail the concept of going from debt to wealth in a wealth-focused manner, credit debt relief and debt elimination programs.
| Learning More About Debt to Wealth…
Turning Debt Into Wealth: Creating the Habits - Turning debt into wealth can be accomplished by focusing on creating wealth building habits...
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