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“So how does it feel to be successful?” he asked. I could feel parts of my stomach cringing on the inside. After a long pause I said “I don’t consider myself successful I believe that I’m always learning and growing.” If you’re new around here I grew up in an inner city, in a single parent home, first in my generation to go to college and I have dreams of giving my future children a better life than I had.
Yes although I was successful at paying off my student loan and credit card debt of $47,500 I still feel as though I have a long way to go in my mind until I’ve reached my idea of success which looks different for everyone. I also don’t plan on being debt free forever. I’m not anti-debt completely. I am pro use debt wisely and I do plan to use debt as leverage to build wealth.
One debt I wasn’t expecting to get hit with was from the IRS. I received a letter from the IRS stating that I owed $610 since I didn’t put aside enough money in taxes last year. As an entrepreneur it’s up to me to put aside the proper amount for taxes which is one thing that I do miss about having a 9-5 they handle the taxes for you. It is tough seeing how much money you made and then having to manually put the money into as separate savings account for taxes. Last year I was only putting aside 25% of my earnings towards taxes, when I should have been putting aside 30%. You live and you learn and for 2018 that’s exactly what I’ve been doing. I’m thankful that I only owe a couple of hundred dollars vs a couple of thousands. #Hallelu
I do feel as though once you’re debt free people think that you will be debt free forever which isn’t always the case. In today’s post I wanted to share 3 lessons I’ve learned about debt.
#1. Wealth and debt can indeed co-exist
Most wealthy people have debt. They use debt as leverage to help them increase their net worth this is especially true when it comes to real estate.
In a business Insider article twin brothers who turned a single house into nearly $8 million of property stated they
“had both been working in commercial banking and noticed a trend among the tax returns they analyzed: The people with the highest net worth owned real estate.”
Without getting a loan from the bank it would be super hard for people to buy homes because not many people can afford to just purchase a property with $400,000 of straight cash. I don’t believe that people should be afraid of debt especially if it can help increase your net worth over time.
“Keep in mind that when you determine your net worth, you must subtract your liabilities – including your mortgage. If your home is valued at $300,000 and you owe $200,000 on your mortgage, your home will effectively add $100,000 to your net worth ($300,000 – $200,000 = $100,000 equity).”
I’ve always been a fan of real estate and one day I do plan to own properties. A friend of mine Kendra owns more than 7 rental properties and now she teaches other people how to get started in real estate. We actually taught a masterclass in February on “The things I wish I knew before buying my first home”
Here is some of the things we talked about during this one hour workshop:
- Renting vs Owning – an honest look at the pros and cons
- The credit mistake I made 10 years ago that I am still paying for today, and how to avoid it
- 3 ways to get over the down payment hurdle
- 5 things you can start doing today to prepare for home ownership
- What is a debt to income ratio, why it matters and how you can fix yours
If you’re sad that you missed this bomb workshop where Kendra was dropping gems don’t be because I’ve recorded it for you. You can purchase the replay here:
There are MULTIPLE ways to get started in real estate investing. The key is to get educated and learn which route is best for you and your situation another great resource that Kendra has to help you get started in real estate is The Real Estate Summit– a six part unlimited access pass to resources that teach you multiple ways to get started in real estate investing. The webinar offers a wealth of in- depth knowledge from six industry experts on subjects such as flipping real estate, wholesaling, tax deeds, rentals, house hacking, realty groups and so much more all in one comprehensive webinar style course. If you’re interested you can check it out here:
#2. Do not forsake your investing and saving goals while striving towards debt freedom
I know I know you can’t wait to be debt free and you’ve been putting every extra penny towards your debt, but please don’t forget about saving and investing. Paying off all of your debt isn’t a competition. You don’t have anything to prove to anybody. It took me 7 years and a ton of sacrifices for me to pay off all of my debt. I didn’t get serious about paying off my debt until 2015. Before that time I was paying the minimum amount on my debt while building up my savings and my investments. This was important to me because I didn’t want to be debt free but have a $0 net worth meaning no assets or investments. Below is a screenshot of my net worth in 2015. As you can see Having investments, savings AND paying off my debt all contributed to my net worth growing.
#3 Use your debt, don’t let it use you
There are some people that tell you don’t have any credit cards. Credit cards can be good or they can be bad depending on how you choose to use them. I have 3 credit cards that I pay off the balance in full each month. If you get into the habit of paying off your credit cards in full each month you are able to not get charged interest and depending on your card you could benefit from cash back rewards.
However if you don’t have the disciple to pay off you card balances back in full each month that’s where things can get dangerous. You don’t want to get to the point where you’ve maxed out your credit card at $10,000 and can only afford to pay the minimum balance and the majority of that payment is simply going to the interest while posting a cute pic of you out at a day party with the caption “Out living my best life”
There are wise ways to use debt and you don’t have to be afraid of it. Remember that savings and investments are also equally important as paying off your debt. I believe that if you can get into the habit of saving large amounts of money that money can be used to invest, beef up your savings, or be used to pay off your debt. I talk more about different strategies on how to reach your money goals in my free 5 day email course. Build your first 5k. Be sure to sign up below!
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