Getting Debt Working Hard For You

This is part three of the mini series on The 5 Pillars of Financial Resilience. If you haven’t yet watched episodes one or two – Pillar #1, Being a Great Leader to Your Money, and Pillar # 2, Growing Your Assets – you might like to watch those first.

There are five pillars of financial resilience that make up the wealthy ecosystem we all need to create financial security and real sustainable wealth. 

Having these in place enables us to stop stressing about money. 

• No more waking up worrying how you are going to pay those bills. 
• No more wondering what's going to happen in the future.

Pillar #3 is understanding that four letter word…

► DEBT ◄

Debt is one of the most devastating things in many people's lives – and also one of the most misunderstood wealth-creation instruments. 

Watch the Pillar #3 video now to understand how to get debt working for you not against you.

►BREAK FREE FROM CONSUMER DEBT 

Consumer debt is modern day slavery. 

Consumer debt is used as one of the most insidious ways to trap people into a cycle of never getting “there.”

Consumer debt peddlers
are financial drug pushers.

They promise the impossible dream – having what you think you need with money you don’t have.

You deserve it! they tell you.

You’ve been chosen! they tell you.

Because you are special, you’ve qualified for this loan!

That’s the lie they tell you.

Instead of realising the devastation about to be wrought by this insidious offering – and knowing to run screaming into the mountains – the seduction of the “have it now” seemingly easy fix gets people buying stuff. Stuff that has poor resale value and drains the budget for years to come – long after the buying high is forgotten. Sometimes people are still paying for stuff long after they’ve thrown it away! 

Credit card minimum repayments are designed to keep you hooked for life. Paying only the “minimum repayment” it can take over 12 years to clear credit card debt – and that’s without increasing what’s due. And banks know the average person will keep using the “available credit” and never break free.

Having consumer debt in your life is one of the most devastating things that will prevent you from becoming wealthy. 

Most people think wealth is an external thing that others can see from outside. Nothing couldn’t be further from the truth.

What house do you live in?

What car do you drive?

What clothes are you wearing?

What furniture do you have in your home?

Where do you vacation?

What school do your kids go to?

► THE DEVASTATING / LIBERATING TRUTH

All of that is BS.

Most of what you see and may believe are signs of wealth – the fancy car, the magnificent homes, the designer handbags, the Instagram-worthy vacations – are funded by piles and piles of piles of debt.

Debt props up the devastating illusion which is needed by so many to paste over the deep insecurity of “not being good enough.” 

I'm not saying, don't have those things.

I’m saying, never have them at the cost of your life!

When we can each claim back our worthiness – when we realise there's no car we can drive, no jewellery we can wear, no phone we can have, nothing we can own that can ever define our worthiness – then we’re on the right road.

⏩ You already are.

⏩ You are already enough. 

⏩ You are already worthy beyond measure. 

When we can make financial choices from a place of intrinsic worthiness our lives transform.

Now we can hear our own truth and listen as we ask ourselves... 

❝ What's the life I want to live? ❞

❝ How am I going to do it on my terms, in a way that is healthy and wealthy for me? ❞

If you find yourself in a consumer debt hole, DON’T PANIC and DON’T BEAT YOURSELF UP!

I was deep in a debt hole when I started this journey because I got sucked into the story that I needed those things, that stuff, to be loved, to be worthy, to belong. 

Consumer debt was just what I thought you did. It wasn't even conscious.

When we realise we are heading down the wrong road, the first step is to get off the path. 

It takes just one step to be free.

Notice what path you are on… and if it’s taking you to money hell, stop and say... 

❝ NO MORE! My one precious
crazy life is worth
so much more than this. ❞

Claim back your freedom.

Claim back your authority.

Step off the old road and start walking a new path.

Get the skills and support to stay on the path to freedom.

Get The Wealth Chef book and implement the debt blitzing recipe. 

To change the course of our lives we must be prepared to do some radical things for a short period of time so that we can live free for a long period of time. 

When we know we are pursuing what we are doing because we are choosing ourselves – and because we are choosing freedom – it can be fun and exciting.

Breaking free from consumer debt is the greatest gift you can give to yourself, your family, and those you love. And you will become an inspiration to others by showing them they too can be free.

► MINIMISE NEUTRAL DEBT

Neutral debt is where you take a loan to buy or control something that should hold its value.

A mortgage bond on a home is an example of neutral debt.

It's neutral because in theory you should be able to sell that property and clear that debt. Most people will need to take on neutral debt in order to have a home, if that's what they are really wanting. 

But it's super important you don't overextend. 

Don't get caught into the illusion that a home is your most important asset. 

Bank hype about property ownership leads people to buy the most expensive place they can afford.

If you take on the biggest mortgage the financial industry sells you (that you “qualify” for) you don’t have any money to get real assets! 

If you feel you must own a home, that's great. AND your job as the CEO of your amazing life is to ensure you fulfil that want in a way that is wealthy. 

If you have neutral debt, it is important to know it is neutral – you must not treat it in the same way as you treat consumer debt. 

In a low interest environment you should not reduce your neutral debt at the expense of investing. Even in high interest rate periods you want to keep building real assets rather than put everything into your home.

So many people say to me, “Ann, when I've paid off my mortgage, then I'll get to investing.” 

No, no, no, no!

That is super, super dangerous. 

Real assets are Pillar #2 for a reason. You need assets working for you if you want to be free. 

Waiting will cost you dearly.

When it comes to your debt reduction, consumer debt is your high priority, but paying down neutral debt in a low interest environment does not make sense. 

Rather take that extra money and invest it – and then your assets can pay your mortgage for you.

In periods of high interest rates you might increase mortgage payments – but only if that leaves space in your budget to keep drip-feeding your real asset base.

► ACCELERATE WITH EXPANSION DEBT

Expansion debt is where you realise why everybody wants to lend you money. 

The person who controls the debt has the power. 

Having money can be a magnifier if you know where to direct it – and debt is a way to have more money.

Unfortunately, for most people, debt is a magnifier of their poor money skills and accelerates their path to money hell.

If you understand debt and direct it consciously with skill, it can be an incredible accelerant to wealth heaven.

If I can borrow money at a 4% interest rate and if I can now get that money working at 8% or 12% or 15% through a real asset, I get to keep the extra money the asset makes after I’ve paid off the cost of borrowing. 

Money is making me money. 

Someone else's money is making me money! 

With expansion debt you can now borrow and accelerate your time to freedom because you're buying assets with that money instead of consuming it. 

This is how the truly wealthy operate. They use debt to accelerate their time to freedom by using it to get more assets. 

When interest rates are high and equities flat, the wealthy keep buying real assets at discount prices (and/or accumulate cash to exploit asset discounts) – they don’t put everything into the mortgage. 

But please don't rush out and take on a whole pile of debt until you’ve got Pillar #1– Leadership and Management in place. 

You need to know how to walk before you jump into the Formula One car and whiz around the racetrack. If you don’t have a good grip on your money flows and know how to stay clear of consumer debt, you're just gonna smash into a wall.

That’s Pillar #3 – Getting Debt Working Hard For You

Remember, wealth is created by an ecosystem, not a one-off event. 

Big love

Ann

P.S.  Hey, continue the wealthy conversation on the Facebook Community Page (it’s free to join) and see what others are saying about debt issues. We’d love to hear how you're blitzing your debt. Share lots of detail – thousands of Wealth Chefs in the making visit the group each week for juicy wealth snacks, insights and inspiration as they create their juicy financially free lives. Your ideas and shares may trigger someone to have a big breakthrough – and you might find yourself inspired by others' stories.