Uncomplicated Wealth Building for Beginners: Get RID of that DEBT!

 

 



Personal finance for most of us is not something that we are taught in school or college. Most of us learn it the hard way by making mistakes. It does not have to be that way. Why does one have to be broke before they become smart?! Why does there have to be a family emergency before you realize that your finances are not in order! Living paycheck to paycheck is defined as BROKE! You can do better than that!

There is a lure in the human mind about living in the moment and postponing the consequences to the future. Credit cards were created to just do that. The thin line between needs and wants is further blurred by the ability to pay for something one cannot afford to buy today.  We walk into stores and wonder sometimes," my credit score was so good I bought a twenty thousand dollar car at zero percent financing. I ripped the company off!". Well the reality is when somebody offers a zero percent financing, not only are you using up your money that could have been saved and invested to grow, the seller has increased the price of the goods so much that the financing does not matter. The worst negotiations on price often occur with zero percent financing.

First step to tackle debt is to sit down and list out all your debts be it credit cards, student loans, car loans, home loans and others. Categorize them into high interest rate debts (rate higher than 7 percent) and low interest rate (rate lesser than 7 percent) Once you pay off your first debt it gives that sense of accomplishment that will change your behavior and fire you up to get rid of all of your debt in no time!

In the previous blogs we talked about building wealth and now we talk about paying off debt. You may be wondering what to do first? Well get your emergency 6 month expenses cushion in place first. Then pay off the high interest rate debt, and then start building that base for your future financial freedom following the steps of investing in parallel with  paying off other low interest rate debts.

But remember: Debt Rhymes with Death for a Reason.

So put on your smart hat and work to be DEBT-FREE!