The Truth About Debt

Here are four myths dangled in front of us constantly:

o debt is the way to build credit
o debt is a tool to be used
o debt is the only way to get ahead
o debt helps you build prosperity

Here are the Truth:

o If you saved $150,000 cash no one would refuse to sell you a home. (it can be done, if you learn to budget)
o Debt is a tool alright, a tool banks and credit card industry uses to become even richer, and keep you poor.
o Anyone believing debt is the way to get ahead is stupid. As long as you don't own something outright, without debt, you are not ahead. You don't even own the item, until it is paid off in full.
o How the hell can anyone believe being in debt makes you wealthy? By definition, debt is NOT wealth! (later I'll explain a bit more in depth, good debt and bad debt)

Some Facts about baby boomers: [ from USA Today ]
56% have car loans/payments
59% have credit card debt
78% still have a mortgage heading into retirement

An additional fact: few boomers have enough money to retire on and will have to work for the rest of their lives.



Debt makes you a slave to someone else, and they become rich. Think of it this way, if you saved and invested every penny, instead of paying on your debt, you would be more than a millionaire, possibly even a multi-millionaire. With that kind of money you could afford almost anything and never owe anyone a dime, or a penny for that matter. Going in debt is a dumb idea. Not getting out of debt is even dumber.

An example: A person making $30,000 a year you will make $1.35 million without interest or dividend payments, during their working life. With just 4% compound interest you would end up with $1.54 million. I admit, it is not realistic because you have expenses which are not taken into account. If you were able to save just half of your income it would result in nearly $8 hundred thousand. Still not bad. This is only a what-if example, an example of what could happen if you didn't acquire debt, but certainly a truth - no debt means you can build wealth. Which would you want: Debt? Wealth?

To get out of debt takes discipline and a lot of will power, but there is absolutely no one that can't do it. No one! Be like the those who built wealth and do the same, create a budget/spending plan.