There is an ongoing debate about whether or not debt is an effective tool for building wealth or a means of putting oneself into bondage. Financial advisor and radio personality Dave Ramsey and marketing expert Dan Kennedy (aka, “The Millionaire Maker”) are both passionately against the use of debt for any financial purpose and consider it to be a severe hindrance to wealth creation. On the other hand, there are many financial experts who passionately disagree with this position and who consistently advise people to leverage debt to build wealth…so who is right?
In this article, we’ll be looking at some of the facts about leveraging debt so that you can make a decision as to whether it’s the best course of action for you to achieve financial freedom.
Who Advises on the Use of Debt for Building Wealth?
Interestingly enough, many People who advocate the use of debt for building wealth have a vested interest in selling debt to people. Many of them make a commission through the selling of debt, and this means they have a vested interest in debt, but not for your benefit. It’s also a fact that many financial experts who advocated the leveraging of debt for building wealth were devastated during the recent financial crisis…and this is not the first time something like this has happened. During the presidency of Jimmy Carter, a similar financial crisis wiped out the wealth of many who were leveraging debt in order to build a net worth.
Also, the stock market crash which came just before the great depression was caused as a result of people trading “futures,” which is the equivalent of purchasing stocks using only “down payments” and thus a similar approach to the borrowing of money to build wealth. On the other hand, living without any debt at all is a superior form of financial independence because it leaves you practically bulletproof against such financial disasters.
In fact, 75% of the Forbes 400 claimed that getting out of debt and staying out of debt was the first step to becoming financially secure and wealthy. So what can you do to start getting yourself away from the use of debt and start doing what these wealth people have done to achieve financial freedom?
Three Steps to Freeing Yourself from Debt and Building Solid Wealth
The first step to freeing yourself from debt is to put enough money in reserve to handle an emergency which you would normally use debt to handle. This can be $500 to $1,000, just enough to help you wean yourself off of using debt. Second, get a plan together for “investing” into getting yourself out of debt, and do this before you start doing other types of investments. If you pay off debts which carry interest rates of 15 to 20%, you’re better off than you would be investing in things which only yield 12 to 15% returns.
Finally, make a commitment to use cash for everything in the future, including purchases and investing.
These three simple steps will keep you from being vulnerable to financial crisis and will help you to build the independence which is required for establishing financial freedom and for building wealth.
There is more…Click here to receive your free ebook on Personal Wealth Building and learn more…
Book Release Soon…Spend Don’t Save