Who wants to be a millionaire? Or a billionaire? Most of us do. We all look forward to the day when our net worth is in 7 figures or even more. Having plenty of money is possibly the number one priority of the vast majority. Money is very important, and rightly so.
Millionaire and Billionaire wannabes take note of what I’m about to say. You can’t attain millionaire or billionaire status without good debt. Unless you’re expecting to win the lottery or inherit money. Those who are on top of the financial ladder use debt to make it happen.
It’s important to make clear my focus is not on debt, but good debt. Everyone understands that debt means to owe. It is an obligation to repay someone what you have borrowed, sometimes with interest. My focus instead is on good debt. Borrowing money to invest in assets, things that put money into your pocket is good debt.
Bad debt, on the other hand is the exact opposite. Sourcing funds and investing it in liabilities – things that take money from your pocket typifies bad debt. Therein lies the difference between good and bad debt. With the former the debt is used productively, while the latter makes use of borrowed funds non-productively.
Good debt will help you achieve financial success. Here are several things you need to know:
Most people lack the required funding to achieve their dreams
It’s a fact that one needs to spend money to make money. In order to build wealth you must invest in wealth building ventures that require money. Most times these ventures are capital-intensive. Only a meagre few possess enough resources to fund their wealth drive. This means seeking for funding to execute efforts that end up being profitable -good debt.
The rich use Other People’s Money to become rich
I have and continue to study the rich and financially successful. These individuals work a lot with bankers, using other people’s money to build wealth for themselves. Without OPM they wouldn’t have been able to make substantial wealth. In fact every rich man has a banker in his or her money team.
Good debt opportunities attract investors
Many investors are on the lookout for opportunities. Once the business is seen to be viable they can provide loans to be repaid or exchanged as equity. Investors believe they are getting a higher return in future – good debt.
Shopping around for the best deal before taking on the good debt
One must seek for the best deal and most favourable terms before going out and borrowing funds. This is imperative. Funds borrowed attract interest and a higher rate of interest.
Examples of good debt
Taking a mortgage to buy property, investing in a business idea, buying a car for transport and even investing in a University education ore examples of good debt. Each of these examples is likely to give you the opportunity of making more money.
Good debt is a continuous and progressive cycle
Good debt is a process that continues for a long time. You should keep requiring funding as you go along in your life. That is, if you want to be rich.
What if the venture fails?
Business contains an element of risk. So what if the venture you took a good debt for fails to create a higher return as expected. Two things – One, learn from your mistakes, and two, work hard on repaying the loan notwithstanding. Don’t give up. Try again.
It’s key to reiterate that good debt brings you more money, while bad debt costs you money. Please be guided by this simple distinction before you proceed to go into debt. Ask yourself this question – Will this debt be used to bring more money or less money into my pocket. Always embrace debt for the right and proper reasons.
And for those who don’t want to enter into debt? Then forget about making millions and billions!