Use Good Debt to Buy Assets
Would you like to become rich? Did you know you can achieve that by using debt to your advantage? If you can use that debt to buy something that will pay you back in the future, then it’s known as good debt. An example is when you use debt to pay for an education, which will allow you to get a better job which will pay more. If you use debt to buy assets, that is also a good use of debt. What is an asset? An asset is something that gives you a positive cash flow every month. If you buy rental property and rent it out to tenants, their rent is always higher than the mortgage you need to pay for that property. If you save up that extra money, you can reinvest it into buying more assets. If you want to become rich, you simply have to collect more of these assets than liabilities.
A liability is something that costs you money every month. A car would be a liability because not only do you have to pay for it every month until it’s paid off, even if you sell it, you would not get its full value back. Even if the car was brand new, once you drive it off the lot, it loses half of its value. Many people believe that a house is an asset but it isn’t because having a house will cost you money every month. The only way to make a profit with a house is if you fix it up, and sell it at a higher price later. But that has nothing to do with being an asset because you won’t make any money until it gets sold. An asset is strictly something that brings money in every month, not something that can be sold for a profit.
If you want to become rich, learn to use debt to your advantage. Only buy assets and avoid liabilities. Many people try to become rich by buying low and selling high, but that can be a very risky maneuver. Unless you buy something for way below the market value, it can often be very hard to sell again. An example is buying real estate. If the economy is down, its a buyer’s market and it will be very easy to buy a house for cheap. But that house will keep costing you money every month until you rent it out or sell it, which will be harder. After all, if it sold easily, why would someone sell it to you in the first place? People tend to be greedy and want as much as they can for their stuff, so they won’t sell to you for a cheap price unless they tried to sell it for higher and failed. Before you purchase anything, think carefully about if it would be a good idea to invest or a better idea to wait. Once you know which investments to go after and which to skip, becoming rich will become possible.