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how debt can springboard you to wealth

How Debt Can Springboard You to Wealth

how debt can springboard you to wealth

If you have debt, turn it to your advantage. Few people realize that debt can springboard you to wealth. We share an example of this on today’s podcast.

On The BIGG Success Show today, we talk about how to get out of debt.

This show is inspired by a recent report on consumer debt levels by the Federal Reserve Bank of New York. It shows that household debt in the U.S. hit a record high in the first quarter of 2019, up 8% from the previous record reached in the third quarter of 2008.

So if you’re in debt, you’re not alone. But debt can be good or bad. We believe debt is a tool. So today, we show you how to get out of debt and then, how to use debt to your advantage – to turn debt into wealth. Here’s a summary of that discussion…

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take a bite out of your expenses for BIGG Success

How to Control Your Finances in 3 Simple Steps

take a bite out of your expenses for BIGG Success

How can you take control of your personal finances?

Look for the low-hanging fruit!

Step 1: Take a bite

Pick one of your biggest, optional expenses and take a bite out it. Let’s take eating out as an example.

You don’t need to eliminate it altogether. Just reduce the amount you spend a little bit…say ten percent.

Let’s say you eat out ten times a month. You go to really nice restaurants. You order either an appetizer or a dessert each time.

You may:

  • Opt for staying in one of the ten times
  • Order a less expensive entrée two or three of the ten times
  • Go to a lower-priced restaurant two or three of the ten times
  • Don’t order an appetizer or a dessert five of the ten times

It doesn’t matter what you do. Just do something to start harvesting some extra money immediately.

Step 2: Don’t let it spoil

So now you have picked some low-hanging fruit. What do you do with it?

This is really important because, if you let it sit around too long, it will spoil. It will be used for something that doesn’t advance you toward BIGG success.

So use the money you save in Step 1 to:

  • shore up your emergency fund
  • pay down debt
  • PREFUND purchases

Start with the emergency fund so you’ll have the cash you need when reality bites. You won’t have to rely on a credit card or some special financing deal. How good will that feel?

Once you have six months in your emergency fund, you’re ready to start paying down your debt. Can you imagine not having any debt? Month by month, you’ll see it coming true.

When your debt is gone, use the extra money (and the money you’re saving from payments on debt that doesn’t exist anymore) to PREFUND future purchases. So instead of financing them, you’ll have the cash to pay for them on the spot!

Step 3: Take another bite!

Once you’ve fully digested the first bite we discussed in Step 1, repeat the process again. You may take another bite out of the same expense or pick another one.

Don’t fret about your money woes. Take action with these three simple steps! You’ll soon feel a sense of control over your personal finances. It leads to BIGG success!

Image in this post from stock.xchng

The Best Investment You Can Make Now

finance_mazeStocks are up significantly from their low in March of this year. Of course, they still haven’t clawed their way back to the level we saw in 2007. However, you have to ask yourself if stocks are the best place to put your money right now.

Treasuries – bonds issued by our government – have also had quite a run as investors have fled to safety. If interest rates go down, the value of the underlying note goes up. Interest rates are incredibly low right now. How much lower can they go? Read more

Making Money Multiply Magically

magic moneyWe often romanticize about what life would be like with more money. We may think we would have more leisure time. We may picture ourselves spending some of that time in front of our new plasma TV. We may assume we would be happier.

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But then the reality kicks in.

Research shows that we tend to quickly spend our new found cash. It also shows that new material possessions make us happier for a very short period of time.

More importantly, we make an incorrect assumption about what it takes to make more money. We often have to spend more time working and commuting. So we actually have less leisure time.

We end up in the rat race.

We work more to make more money. Then we spend more money so we have to work more to make yet more money. Then we spend more so we have to work more and on and on.

There are two lessons here for us:

  • Be careful how you define bigg success. If it means more money, understand that there is a price. You’ll almost certainly have to invest more time.
  • Our definition for bigg success is life on your own terms. For you, that may mean more money. But it may not. We focus so much in our society on money. It’s important to remember that money is the means to an end, not the end itself.

The funny thing is that you often end up with more money when it’s not the center of your focus. Here are four ways to make your money multiply magically:

Focus on your whole life.

Find work that you love. Take up a hobby if you don’t have one already. Build strong relationships personally and professionally. You’ll find that it often doesn’t take much money to spend your time doing the things you love with the people you love.

So your money will multiply magically!

Spend less than you make.

Sounds pretty simple, doesn’t it? But we all know that it isn’t. It isn’t simple but it is necessary.

Don’t fall into the trap of thinking life would suddenly be much better if you just made more money. Make the best of the money you make now and your money will magically multiply.

Avoid consumer debt.

If you have it now, pay it off aggressively. Get used to paying for purchases with cash. This is a timeless principle that applies to all economies and all people. We’ve recently relearned this lesson.

Here’s a question to ask anytime you’re tempted to buys something with borrowed money:

“If I can’t afford it today, what makes me think I can afford it, with interest, tomorrow?”

Many people assume they will make more money in the future. They don’t factor in that their costs will likely be higher in the future. That’s how they end up in the rat race and debt just compounds it.

Note that we didn’t say avoid all debt. It may make sense to borrow money for a legitimate investment. You have to prove out the opportunity, but a lot of people have made their money multiply magically by using leverage.

Invest wisely.

As we learned last year, stocks don’t go up forever. As we’re seeing this year, they don’t go down forever either. So invest in a diversified portfolio of assets. One of the best ways to do this is through no-load mutual funds as part of a qualified retirement plan.

Don’t let your money control you. Control your money and watch it multiply magically! That’s bigg success!

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

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Thank you so much for checking in with us today. Please join us next time when we’ll look at the first win entrepreneurs must achieve. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00476-090709.mp3

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The 5 Components of Your Credit Rating

credit_cardsBigg success is life on your own terms. Our focus today is on money, one of the five elements of bigg success.

Specifically, we want to talk about an asset that is particularly valuable now. Yet it doesn’t show up on your Balance Sheet. It’s your credit score.

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Target credit

This was highlighted in a recent post over at Mashable about Google ads targeting people with high credit scores. People with good credit are positioned to take advantage of these times. Not just with consumer goods, but also with investment opportunities. There are some great deals out there on real estate and businesses.

In addition, people with good credit will get better rates on the money they borrow. So if you have a good credit score, protect it like any other asset.

FICO

FICO was developed by the Fair Isaac Corporation. They have a great piece that explains how your FICO score is determined [PDF]. We’ll summarize it here, but we highly recommend you read their article if you want to know all the details.

Your FICO score can range from 300 to 850. Obviously, higher scores are better. Anything over 720 is considered SuperPrime according to the Mashable post. These are the people Google is targeting in their new ad program.

We’ll look at the five components of your FICO score (along with the weight given to each one for the general population).

Your payment history (35%)

Pay your bills on time. It’s probably no surprise that this is the single biggest factor in determining your score. If you’re not current, work hard to get current and stay there.

The amounts you owe (30%)

We found it interesting that, even if you pay your credit card balance in full every month, you may still show a balance on your credit report. It shows the balance posted on your most recent statement.

One myth they debunk is that you should close accounts so you don’t have too many credit cards. If you’re in good standing with no balance on an account, it doesn’t affect your FICO score.

However, you are better off having fewer cards with a balance. It’s also better to have a small amount outstanding compared to your available credit line.

Be careful not to have too much credit available. It can actually hurt your FICO score. So don’t get, or keep, credit cards you know you’ll never use.

Length of credit history (15%)

Here they look at the age of your accounts in general as well as how long it’s been since you used your account. One tidbit we found interesting:

If you just established credit for the first time, you’ll hurt your FICO score if you open too many accounts too quickly.

New credit (10%)

Here they look at what’s going on now. What credit have you applied for recently? How are you doing on those payments?

This is good news for people coming out of a period of late payments. Just remember, though, it gets a relatively small weighting.

The types of credit you use (10%)

You want a mix of both revolving credit lines and installment debt. For example, a credit card along with a car loan would include both types of credit.

Your credit rating is an important asset. It affects your credit capacity. Your credit capacity may help you fund your next bigg opportunity!

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Get the tips and tools you need to be a BIGG success.
Subscribe to the Bigg Success Weekly – it’s FREE!

___

Thanks for sharing some of your time with us today. Please join us next time when we talk about a higher level of problem-solving. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00431-070709.mp3

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(Image by Andres Rueda,CC 2.0)