With all that has happened over the last three short years; from the housing crisis causing mortgage companies to go out of business (or get absorbed) ceasing lending as we knew it, to the stock market crash and the Credit collapse…to our personal rising debt trying to make ends meet in this crap economy where layoffs and downsizing are the norm. Not to mention the Trillion Dollar debt of our own government which have been “surfing” their debt for years with no solid plan to deal with it…has given me a sore distaste for borrowing money.
Let’s face it, if we all lived within our means, only bought what we could afford, and saved up instead of borrowed money to buy large items, none of us would be suffering right now.
Up to this point, I have never thought of debt as a negative but rather a tool to create more wealth. That was, of course, until I lost the means to pay that debt off. I now understand that we as a society have it all wrong. DEBT IS NOT OK and we cannot continue down this road and expect to be fine.
One can argue that the only exception to this are mortgages on investment properties, but due to the drastic drops in home values, we are learning the negatives of leverage the hard way on that as well. If you have purchased or refinanced within the last 4 years, chances are you are now upside-down on your equity.
-Average homeowners stay in their homes for 7.1 years [NAR®]. With an average 7% mortgage, they will sell their homes still owing over 90% of the principal. If they continue this trend, they will NEVER pay off a home in their lifetimes!
-85% of Americans have a true net worth of less than $250! - Social Security Administration
-The average savings of a retired couple is only $7,000!
HOW DO WE BREAK THE CYCLE?!?
Step 1- You have to stop taking on new debt.
If you cannot stop the flooding, how can you keep from drowning? Which brings us to…
Step 2- Make a list of ALL your expenses. Click here to download my spreadsheet
This is vital as you need to know exactly how much you are spending every month and compare it to your net income. If you have money left over (discretionary income) then you are on the road to financial freedom. If not, look hard to see what can be cut or adjusted. Even if you only have $1 left over, you are on your way!
Step 3- Invest in a program that will guide you to financial freedom.
Make no mistake; this undertaking will require discipline and determination. The idea is to payoff your highest rates or highest monthly payments first to free up cash flow that can then be applied to your next debt paying it off quicker and so on until you are debt free.
Step 4- DO IT AND LIVE IT! Becoming debt free will not happen overnight, but imagine 8-13 years from now with NO Mortgage, NO credit card debt, NO car loans, and taking ALL that money you would have spent on interest and investing it in a safe 2-5% return over the next 10-20yrs. We are talking Hundreds of Thousands of dollars set aside for your retirement!
This is real and this is the pyridine shift we need to make as a society if we ever wish to regain balance and power.
Let’s face it, if we all lived within our means, only bought what we could afford, and saved up instead of borrowed money to buy large items, none of us would be suffering right now.
Up to this point, I have never thought of debt as a negative but rather a tool to create more wealth. That was, of course, until I lost the means to pay that debt off. I now understand that we as a society have it all wrong. DEBT IS NOT OK and we cannot continue down this road and expect to be fine.
One can argue that the only exception to this are mortgages on investment properties, but due to the drastic drops in home values, we are learning the negatives of leverage the hard way on that as well. If you have purchased or refinanced within the last 4 years, chances are you are now upside-down on your equity.
-Average homeowners stay in their homes for 7.1 years [NAR®]. With an average 7% mortgage, they will sell their homes still owing over 90% of the principal. If they continue this trend, they will NEVER pay off a home in their lifetimes!
-85% of Americans have a true net worth of less than $250! - Social Security Administration
-The average savings of a retired couple is only $7,000!
HOW DO WE BREAK THE CYCLE?!?
Step 1- You have to stop taking on new debt.
If you cannot stop the flooding, how can you keep from drowning? Which brings us to…
Step 2- Make a list of ALL your expenses. Click here to download my spreadsheet
This is vital as you need to know exactly how much you are spending every month and compare it to your net income. If you have money left over (discretionary income) then you are on the road to financial freedom. If not, look hard to see what can be cut or adjusted. Even if you only have $1 left over, you are on your way!
Step 3- Invest in a program that will guide you to financial freedom.
Make no mistake; this undertaking will require discipline and determination. The idea is to payoff your highest rates or highest monthly payments first to free up cash flow that can then be applied to your next debt paying it off quicker and so on until you are debt free.
Step 4- DO IT AND LIVE IT! Becoming debt free will not happen overnight, but imagine 8-13 years from now with NO Mortgage, NO credit card debt, NO car loans, and taking ALL that money you would have spent on interest and investing it in a safe 2-5% return over the next 10-20yrs. We are talking Hundreds of Thousands of dollars set aside for your retirement!
This is real and this is the pyridine shift we need to make as a society if we ever wish to regain balance and power.
