[CEO. Freedom from Bad Debt]. Investing with Debt The bottom line is that, in order to become a successful investor, you first must put your personal finances in order. Simply said, if you have too much bad debt due to poor financial habits, please do not get into any more debt, good or bad. Once you get your personal finances in order and under control, you may be ready to go out and look for sound real estate investments to grow richer on. Remember, the problem with having too much bad debt is that bad debt makes it harder to acquire good debt. For many people, just getting out from under bad debt is enough to make their financial future brighter, even if they do not invest. 10 Steps to Getting Out of Debt The following are the 10 steps we followed to get out of bad debt. Step 1. Tell Yourself the Truth. The first, and probably the toughest, step of all was to commit to tell ourselves the truth—to face the grim reality of how much we owed and to whom we owed it. We knew we could easily lie to ourselves and pretend we were okay financially, which is what many people do. So, face the hard facts and hold yourselves accountable. Step 2. Stop Accumulating Bad Debt. There’s a saying that goes, “When you find you’ve dug yourself into a hole… stop digging.” We basically put a freeze on all debt. Anything we purchased was paid off that month. We stopped adding to our existing credit card balances and took on no new loans. That step alone forced us to be much more cognizant of what monies were flowing out. Step 3. Make a List of All the Debt You Owe. Write down every single debt you owe. This may include credit cards, school loans, car loans, boat loans, IOU’s to individuals such as friends and family members, store credit accounts, vacation home, and your personal residence. Do not include debt for investments, such as rental properties and business investments. And just a reminder, your home is not considered an investment. We are dealing only with bad debt, and bad debt is debt that you pay for. Good debt is debt that someone else, such as your tenants, pay for. Step 4. Hire a bookkeeper. We hired a bookkeeper. She became a valuable member of our team. People often ask, “Why hire a bookkeeper when you have little-to-no money?” The answer is simple: Because our bookkeeper forces us to face the truth of where we are financially every single month. So we sat down with our bookkeeper, Betty, for our first meeting and made a list of every debt we had outstanding. We wanted to pull some of the debts off the list and tell ourselves that those debts weren’t important. We didn’t have to pay those back. But again, that would be lying to ourselves, so we included every debt. That was a very long and painful meeting. When all was said and done, the number staring us in the face had grown to about $500,000 ($400,000 from Robert’s earlier business plus we accrued an additional $100,000 over the years). Paying off a half million dollars, when we had almost no income coming in, seemed an impossible task. We actually had people advise us that we should file for bankruptcy, but we refused to do that. So now the question was, “How do we pay off this debt?” There are three reasons why bookkeepers are important: First, they keep accurate, neat, and orderly records. This is vitally important if you want to build wealth. Today, as our wealth grows, our bookkeeper’s role steadily becomes more important. The second reason is that having a bookkeeper was a tremendous emotional support when facing the harsh realities of our financial situation. Reason number three is simply that rich people have bookkeepers on their team. So if you plan on climbing out of debt, staying out of debt, and becoming rich, a bookkeeper can be one of the most important people on your team. Saying it another way, poor and middle-class people do not have bookkeepers. Rich people do. So find a way to afford a bookkeeper. A Note from Robert This is a step many people in financial trouble want to avoid. They often think they will save money by not hiring a professional bookkeeper. I know I thought that way. After my rich dad reminded me that I was thinking like a poor person, thinking I could not afford something vital to my success, Kim and I bit the bullet and hired a bookkeeper. 21
Posted on: Fri, 09 Aug 2013 02:20:14 +0000
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