For many years, I thought that ALL Debt was bad! My linear mindset was Pay your house off early. Pay all your debts off as soon as possible. My perspective has changed especially when talking about using your debt to be an asset. I am not saying that it is bad to pay your house off early or to Get Out of Debt, but if you keep your head down for 30 years and not even consider alternate investment ideas than in my opinion, it will cost you. What do I mean? Bankers call assets as something you have equity in and has positive value if you were to sell it. Robert Kiyosaki changed the definition of an Asset to the World (including me) when he defined an Asset as being something that MAKES you money. So, how does this apply to debt? Here is a recent example of mine: I borrowed $25,000 recently from a Credit Card that cost 0% interest for 12 months, but had a 3% upfront fee. So, it cost me $750 for the entire year to borrow this $25,000. I placed this into another diversified investment strategy in which I have earned 10.4% within the first 4 1/2 months. It is possible that I will earn over 20% OR $5,000. Subtract the $750 that it cost me to borrow and I am left with a nice 17% return or $4,250 profit on Discover Card’s money (thank you Discover!). As Paul Harvey says, “But wait, there is more!” Now, I have treated that $25,000 like a monthly bill and paid it back $3,750 in the first month and have been and will continue to pay $2,000 a month every month thereafter. Hence, I will not be charged any more interest because it will be totally paid back in full by end of 12 month including the $750 charge. This is where it gets interesting…. if this New Investment Instrument continues to perform like it has at roughly 2.3% a month then in 14 years from now then that investment will grow to $1,114,000. and be producing approximately $25,000 a month in income. Now, we know that past performance doesn’t guarantee future results in any investment. It could be more or less; however, think about what just happened. I used Discover’s money for a short amount of time in order to set me up with a possible nice (even if it ends up being $10,000 a month income in 14 years) new income stream! Here is the question: Would you consider that Good Debt or Bad Debt? This is just one example but i consider this Good Debt for me. I could have just saved that money and started a year later, but It motivated me to take action NOW. There are many more examples of Good Debt but the goal here is to expand your mind. How can you use CHEAP MONEY to help you make more?
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