Rule Number 4, If everyone else is doing it do the opposite

Rule Number 4, If everyone else is doing it do the opposite

I spoke with a couple recently who owe almost no money and own two cars a bunch of stuff and have well funded 401Ks and are sitting on $125,000.00 in cash.

By the time I got off the phone with them I suggested they pay off their home and go completely debt free.

Here’s the catch. They owe $128,000 on the house. Admittedly the thousand dollars a month they spend on the house payment will take 10 years to recover from the point is they currently make 1.27% interest on the money they have in the bank.

Just in case you don’t have a calculator it equals a whopping $1,587.50 a year in interest. They’re paying about $8,750.00 a year in interest to the bank to have the loan.

The $125,000 would be a better investment in paying off the loan. Within a few months they’d have a nice reserve fund again.

Now for the lesson. The majority of people would not pay off the loan. They would instead invest it or spend it but they would continue paying a monthly mortgage and I can guarantee you a C.P.A Account would advise them to keep the debt because of the tax write-off.

Without getting to detailed the tax write-off isn’t worth it either because you’re still paying the interest. It’d be much more financially beneficial to pay the extra couple of bucks on taxes…its way less than the write-off.

The moral of the story is what ever the majority are doing you should do the opposite.

David Dassow

Rule Number 3, You'll Never Get Ahead If...

Rule Number 3..You’ll Never Get Ahead If…

You live above your means. It’s as simple as that. If you’re spending more than you make you’ll never get ahead, period. Exclamation point!

This may seem obvious but I gotta tell you that for years I’d say to myself I’m going to get ahead next payday. If I can hold on until next payday I’ll get ahead.

Well the next payday turned into the next turned into the next till finally a month goes by followed by another month which turned into 6 months and pretty soon several years went by and I was still saying wait until next payday.

You’ve heard me say you gotta get real mad before you do something about your present situation. There are plenty of commercials out there telling you they can reduce your debt or eliminate it altogether like a magician waving a wand.

Poof!

There goes the debt. If you’ve been reading this blog you know my opinion about cheating to lower your debt. You see the debt you have is a symptom of your problem. The debt you have is not your problem.

It may not seem like that to you. You might be thinking if I can just pay down a little bit of my debt I’d be alright. You won’t be alright and I’ll tell you why.

The problem you’re having is the same problem I had. I spent more money than I made. Just like you are. You’re spending more money than you make. It’s that simple. And if you were lucky enough to get some of your debt reduced you’d still have the same problem.

Your problem is your spending. You spend more than you make. Until you stop spending more than you make you’ll find you’re continually digging a deeper hole.

There are two steps to freedom. First step. STOP spending more money than you make. Second step. Pay down the debt you owe until you’ve paid all of it off. It’s that simple.

Because if you'll never get ahead if you spend more than you make….

David Dassow