I had a recent comment from a friend I’ve been working with on paying off his debt and gaining his freedom. The amazing thing about it is he actually thinks the credit card folks are out to get him and I think he’s right and here’s why…
Every day I get several offers to get another credit card or sign a note for several thousand dollars so I can have it now.
The Big Bankers are out to get you. They want to trap you into paying them every month for the rest of your life. The Big Bankers are continually calling you, mailing to you, emailing to you, and talking to you always encouraging you to borrow more money.
Borrow for the things you don’t have. Borrow for the things you want. Borrow because you deserve it. Borrow because that’s what everybody does.
Well, my friend is right. They are out to get you. You need to get a healthy dose of paranoia. You need to take that paranoia and get mad, real mad.
And from now on recognize that if you get a correspondence from the Big Bankers they are out to get you.
David Dassow
Friday, April 25, 2008
Tuesday, April 22, 2008
They laughed at me when I said I'd be debt free but...
When I showed them the proof they were speechless.
I consult with a lot of folks about owing money about being debt free about living a debt free lifestyle. Not everyone agrees with me. Not everyone understands the stress and worry they have in life because it’s a constant strain to make the minimum payments.
When you’re in debt up to your eyeballs you constantly are begging the Big Fat Cat Bankers to raise your credit limit so you can get food, pay another bill, buy some gas, or get a coffee.
The only reason people laugh at you when you tell them you want to be debt free is because they’re jealous. These folks want you to be miserable like they are. They want you to stay in the same boat they’re in because few make the necessary changes to go from the 80% crowd to the rich 20% folks.
If you ever want to know what to do find folks that have done what you aren’t doing. If you can’t find folks that are doing what you want to do than do the opposite of what everyone else is doing.
You can be debt free. You can have a wonderful financially rich life if you’ll do now what no one else will do so later on you’ll be able to do what no one else will do.
That’s why folks may laugh at you now but won’t later on. Those folks will be asking you what you’ve done that they haven’t
David Dassow
I consult with a lot of folks about owing money about being debt free about living a debt free lifestyle. Not everyone agrees with me. Not everyone understands the stress and worry they have in life because it’s a constant strain to make the minimum payments.
When you’re in debt up to your eyeballs you constantly are begging the Big Fat Cat Bankers to raise your credit limit so you can get food, pay another bill, buy some gas, or get a coffee.
The only reason people laugh at you when you tell them you want to be debt free is because they’re jealous. These folks want you to be miserable like they are. They want you to stay in the same boat they’re in because few make the necessary changes to go from the 80% crowd to the rich 20% folks.
If you ever want to know what to do find folks that have done what you aren’t doing. If you can’t find folks that are doing what you want to do than do the opposite of what everyone else is doing.
You can be debt free. You can have a wonderful financially rich life if you’ll do now what no one else will do so later on you’ll be able to do what no one else will do.
That’s why folks may laugh at you now but won’t later on. Those folks will be asking you what you’ve done that they haven’t
David Dassow
Monday, April 21, 2008
Wealth Destroyer #1
Lack of financial diversification
One of the biggest goals for you when you’re in debt is to figure out what your investments should be.
The number one destroyer of wealth is “Lack of financial diversification” and if you’re still in debt now you are destroying your short and especially long term WEALTH because there is no diversification.
Wealth diversification is taking all of your assets and spreading them. It’s similar to the old saying, “don’t keep all your eggs in one basket.” If you drop the basket you lose all your eggs.
The same goes for your financial wealth. If it’s all in one investment you risk going broke in one shot.
The same goes for debt. If you owe lots and lots of money and have no savings you’re in a WEALTH DESTROYER position. It’s not a good position to be in and I would argue it is even more dangerous than if you had all your money in one investment. If you have all your money in one investment you have a shot of it going up in value.
With debt it will never go up in value it will always cost you money. The longer you wait to pay off your debt and if it’s the only investment you have you’ve got to start and pay it off now.
Use these posts for strategies and encouragement to get it done.
David Dassow
One of the biggest goals for you when you’re in debt is to figure out what your investments should be.
The number one destroyer of wealth is “Lack of financial diversification” and if you’re still in debt now you are destroying your short and especially long term WEALTH because there is no diversification.
Wealth diversification is taking all of your assets and spreading them. It’s similar to the old saying, “don’t keep all your eggs in one basket.” If you drop the basket you lose all your eggs.
The same goes for your financial wealth. If it’s all in one investment you risk going broke in one shot.
The same goes for debt. If you owe lots and lots of money and have no savings you’re in a WEALTH DESTROYER position. It’s not a good position to be in and I would argue it is even more dangerous than if you had all your money in one investment. If you have all your money in one investment you have a shot of it going up in value.
With debt it will never go up in value it will always cost you money. The longer you wait to pay off your debt and if it’s the only investment you have you’ve got to start and pay it off now.
Use these posts for strategies and encouragement to get it done.
David Dassow
Sunday, April 20, 2008
How a cash-flow shortage can ruin your good debt theory
I’ve argued about this notion of good debt verse bad debt and today we’re going to take a look at the murderous CASH FLOW CRUNCH and how it can ruin you over-night!
It doesn’t matter what the so-called “good debt” asset is. It can be a home, property, a business, or merchandise such as art that goes up in value. Whatever it is if you borrow to get the asset a cash-flow crunch can ruin you.
There’s a story in one of Larry Burkett’s books (Larry Burkett, by the way, was a Christian Financial Counselor and big believer in Debt Free Living). He wrote about an individual who had a business in Texas in the 70’s. He had $500,000 in the bank and his Accountant advised him to finance his accounts receivable.
He owed $350,000 in short term debt and way able to pay it because his customers were paying on time and everything was terrific.
In the 1980’s Texas went through a pretty severe recession and our business owner’s bank went out of business. He had $500,000 dollars in the bank but it was only insured for $100,000.
When the Fed’s took over the bank they contacted the business owner to tell him he now had $100,000 in the bank. He had lost $400,000 over night.
That was actually the good news. The bad news was that same bank had the short-term loan of $350,000 and the Fed Guys Called The Loan Due. This meant the business guy had to pay off the $350,000 dollars immediately.
But, he only had $100,000 because that same bank that went under shafted him out of $400,000.
Our business owner had to borrow an additional $250,000 dollars from another bank to make good on the loan. He now had no reserves and no money! The recession caused a 10% decline in his business and our business owner ended up going bankrupt.
The moral of the story and the thing that had made his wife really mad was she kept telling him to pay off all the debt. She could never understand why he had so much debt when he could have run the business completely debt free.
But, our business owner took his advice from the Accountant that told him some debt is good debt and you can write off the interest you pay on the debt and keep more money in the bank.
That strategy of good debt verse bad debt cost our business owner $150,000 and he went bankrupt.
The good dent theory doesn’t work when you have cash flow crunches and ultimately if you could pay off all your debt why wouldn’t you?
To debt free living…
David…
It doesn’t matter what the so-called “good debt” asset is. It can be a home, property, a business, or merchandise such as art that goes up in value. Whatever it is if you borrow to get the asset a cash-flow crunch can ruin you.
There’s a story in one of Larry Burkett’s books (Larry Burkett, by the way, was a Christian Financial Counselor and big believer in Debt Free Living). He wrote about an individual who had a business in Texas in the 70’s. He had $500,000 in the bank and his Accountant advised him to finance his accounts receivable.
He owed $350,000 in short term debt and way able to pay it because his customers were paying on time and everything was terrific.
In the 1980’s Texas went through a pretty severe recession and our business owner’s bank went out of business. He had $500,000 dollars in the bank but it was only insured for $100,000.
When the Fed’s took over the bank they contacted the business owner to tell him he now had $100,000 in the bank. He had lost $400,000 over night.
That was actually the good news. The bad news was that same bank had the short-term loan of $350,000 and the Fed Guys Called The Loan Due. This meant the business guy had to pay off the $350,000 dollars immediately.
But, he only had $100,000 because that same bank that went under shafted him out of $400,000.
Our business owner had to borrow an additional $250,000 dollars from another bank to make good on the loan. He now had no reserves and no money! The recession caused a 10% decline in his business and our business owner ended up going bankrupt.
The moral of the story and the thing that had made his wife really mad was she kept telling him to pay off all the debt. She could never understand why he had so much debt when he could have run the business completely debt free.
But, our business owner took his advice from the Accountant that told him some debt is good debt and you can write off the interest you pay on the debt and keep more money in the bank.
That strategy of good debt verse bad debt cost our business owner $150,000 and he went bankrupt.
The good dent theory doesn’t work when you have cash flow crunches and ultimately if you could pay off all your debt why wouldn’t you?
To debt free living…
David…
Good debt verse bad?
I addressed this once before but am going to address it once more. There’s plenty of articles on the web talking about good debt. Usually these stories tell you that owning your own home is good debt because its an asset that continues to go up.
There are two fallacies in the home argument (full disclosure I still owe money on my home and plan to have it paid off in less than 2 years).
There’s an assumption if you’re renting you’re throwing away money because non of it goes toward the principle of your home like when you have a mortgage.
Here’s the fallacy in the argument. When you take a loan out for a home the loan is amortized over 30 years (there are some loans for 15 years). Without trying to confuse you I’ll give you a simple definition of amortization. If you take a loan out for 30 years each month your payment is figured based on how much money you owe over the entire 30 years.
If you borrow $100,000 for 30 years your first payment (7% interest) is $665.30 ($583.33 interest, $81.97 principle). The following month you’ll owe $99,918.03 principle. You don’t have to be a rocket scientist to figure out you’ll be paying a ton of interest for the first 15 plus years.
By the time you’ve had the loan for 30 years your home (that originally cost $100,000) will cost you $239,508 dollars ($139,508 in interest).
There’s no such thing as good debt verse bad debt. You either owe money or you don’t owe money. It’s a life-style decision. No debt is the easy way of living. Owing debt is a rough way of living.
David…
There are two fallacies in the home argument (full disclosure I still owe money on my home and plan to have it paid off in less than 2 years).
There’s an assumption if you’re renting you’re throwing away money because non of it goes toward the principle of your home like when you have a mortgage.
Here’s the fallacy in the argument. When you take a loan out for a home the loan is amortized over 30 years (there are some loans for 15 years). Without trying to confuse you I’ll give you a simple definition of amortization. If you take a loan out for 30 years each month your payment is figured based on how much money you owe over the entire 30 years.
If you borrow $100,000 for 30 years your first payment (7% interest) is $665.30 ($583.33 interest, $81.97 principle). The following month you’ll owe $99,918.03 principle. You don’t have to be a rocket scientist to figure out you’ll be paying a ton of interest for the first 15 plus years.
By the time you’ve had the loan for 30 years your home (that originally cost $100,000) will cost you $239,508 dollars ($139,508 in interest).
There’s no such thing as good debt verse bad debt. You either owe money or you don’t owe money. It’s a life-style decision. No debt is the easy way of living. Owing debt is a rough way of living.
David…
Consolidating Your Loans is a Disaster!
Try google(ing) debt free sometime and you’ll be amazed at what you see! Between sponsors and the top ten hits you’ll find virtually 100% offering you a way to borrow your self out of debt.
Think about that strategy for a moment. You owe money. If you borrow more money you’ll owe either the same amount or more money than when you started.
How in-the-heck can borrowing money get you out of debt?
That’s the insanity of the “pitch” these guys are throwing at you. They’ve got several ways for you to borrow more money to consolidate your debts. Here’s two secrets to this strategy these guys don’t want you to know.
First, these guys are the bad guys. They’re the Big Bankers! You already owe the Big Bankers money and now they want to loan you more money!
Second, consolidating your debt is a really bad idea for one simple reason. Let’s say you have 10 credit cards with minimum payments ranging from $15 - $250 dollars. Lets further estimate your total monthly minimum payments are $2,200 dollars and its tough making those payments.
If you consolidate you’ll have one payment. Even if you’re able to reduce your overall payments say $200 a month you’ll now have to come up with one payment of $2000 a month instead of 10 smaller payments.
It’s a heck-of-a-lot easier to stagger $2,200 dollars in bills a month than to fork over one big giant payment!
The other problem with consolidating debt is it’s really tough to pay it off early. It’s a lot easier to pay down debt with 10 individual cards using the $15 dollar a day strategy (see previous post for details).
David
Think about that strategy for a moment. You owe money. If you borrow more money you’ll owe either the same amount or more money than when you started.
How in-the-heck can borrowing money get you out of debt?
That’s the insanity of the “pitch” these guys are throwing at you. They’ve got several ways for you to borrow more money to consolidate your debts. Here’s two secrets to this strategy these guys don’t want you to know.
First, these guys are the bad guys. They’re the Big Bankers! You already owe the Big Bankers money and now they want to loan you more money!
Second, consolidating your debt is a really bad idea for one simple reason. Let’s say you have 10 credit cards with minimum payments ranging from $15 - $250 dollars. Lets further estimate your total monthly minimum payments are $2,200 dollars and its tough making those payments.
If you consolidate you’ll have one payment. Even if you’re able to reduce your overall payments say $200 a month you’ll now have to come up with one payment of $2000 a month instead of 10 smaller payments.
It’s a heck-of-a-lot easier to stagger $2,200 dollars in bills a month than to fork over one big giant payment!
The other problem with consolidating debt is it’s really tough to pay it off early. It’s a lot easier to pay down debt with 10 individual cards using the $15 dollar a day strategy (see previous post for details).
David
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