advanced guide to getting out of bad debt
Post on 14-Dec-2015
Embed Size (px)
Advanced Guide to Getting Out of
This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is provided with the understanding that the author is not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and country to country and if legal or other expert assistance is required, the services of a professional should be sought. The author specifically disclaims any liability that is incurred from the use or application of the contents of this book.
Copyright 2015 by Robert T. Kiyosaki. All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means or stored in a database or retrieval system, without the prior written permission of the publisher.
First Download Edition: July 2015
In 2015, the average U.S. household has over $15,000 in credit card debt. If that isnt enough, many of you have student loans averaging $35,000 and an average mortgage balance of $157,000 to go along with your daily expenses to support you and your families. When you add it all up, it can be daunting and seemingly insurmountable. There are steps you can take to get yourself out of bad debt.
This is the Advanced Guide to Getting Out of Bad Debt. Were not talking about saving your spare change to put towards your credit card balance. Were talking about a bold move to increase your assets, to take control of your bad debt and your life. This is a big step up from our tried-and-true methods to get out of debt identified in Freedom from Bad Debt (available for free on RichDad.com).
In Freedom from Bad Debt, we started with the essential steps necessary to begin chipping away at your bad debt. While the mechanics are solid and easy to do with some discipline, many of you noticed the part in the book that says:
Q: Do you have to be debt-free before you invest?
A: No. This is your choice. We had quite a bit of debt when we started investing.
2Introduction: Advanced Guide to Getting out of Bad Debt
Many people contacted us dumbfounded. How could you be investing while still in so much debt??!
The answer is: The investing helped us get out of debt.
Due to the number of inquiries, I decided to shed some light on this advanced method. From the outside looking in, it looks like a gamblers way out of debt. That could not be further from the truth.
The Advanced Guide to Getting Out of Bad Debt can be broken down into six steps:
1. Stop spendingFind your financial emotional maturity
2. Start savingPay yourself first
3. Look for opportunities
4. Create/build/find your asset
5. Pay down your debt with your cash flow
6. Celebrate. Repeat.
Each of the above steps is very important. Do not take short cuts. Most people need instant gratification.
Youre not most people.
This process works. It requires discipline and persistence but the rewards are worth it. If you follow the process, youll have cash-flowing assets paying down your bad debt.
Lets get into increasing your cash-flowing assets and reducing your bad debt.
Find Your Emotional Maturity
It is important to point out that financial intelligence is also emotional intelligence. Warren Buffett, the worlds richest investor, says, If you cannot control your emotions, you cannot control your money.
The reason many people fail in the process of getting out of bad debt is they cannot live without instant gratification. Many will sacrifice a richer tomorrow for a few indulgent purchases today. I did not make much money in my 20s and 30s, but I make millions today.
The need for instant gratification is so great in todays society. That is why so many get-out-of-debt educators make you cut up your credit cards. Theyre addressing the symptom instead of addressing the cause. Why? Because its easier and its quicker. They take the easy route to helping you with a symptom instead of addressing the cause.
There are two reasons why I do not tell you to cut up your cards:
1. Its a band-aid for a bigger problem and doesnt solve the problem
2. Your credit cards may be the key to getting you out of bad debt (Ill explain in Step 4)
1. Stop Spending
Step 1: Advanced Guide to Getting out of Bad Debt
Instead, take steps to improve your emotional maturity and intelligence. There are many great authors and teachers that will get into the nitty-gritty details and help you. In the Rich Dad sphere of influence, we have Blair Singer and his book Little Voice Mastery.
Right now though, take the first step to improve your emotional maturity and take the instant out of instant gratification.
When youre looking at purchasing something, spending time watching TV or perusing the Internet, ask yourself, How is this helping me reach my next goal?
And, dont pat yourself on the back and lie to yourself that you deserve a reward because you spent 20 minutes researching your business or investment. Again, be honest. Its great to celebrate all wins and to give yourself a reward. Just be honest on what a win is and if it truly merits a reward.
Ive been there and lied to myself plenty of times. It wasnt until I started having the emotional maturity to be honest with myself and making sure my actions were in line with my goals before I started making actual progress towards those goals.
I would say that when it comes to money, emotional intelligence is the most important intelligence of all. It is more important than academic or professional intelligence. Develop your emotional intelligence so that you have the fortitude to stop spending money on things that do not help you get out of bad debt.
If you dont, your tomorrow will be just like your todayor worse.
It has probably never happened before, but I am telling you to save money. Normally I tell you savers are losers. Before I explain why Im suggesting that you save money, I am going to explain the danger of saving money.
Savers End Up Losing
In the days when the dollar was backed by gold and banks paid a healthy interest rate and inflation did not really exist, saving money was a solid, although boring, way to make money.
Those days are over. The U.S. Dollar is no longer backed by gold. This has created the huge credit explosion we live in today. But with credit, and no gold backing the dollar, debt has run rampant.
Im not talking about individual debt; Im talking about government debt. And the governments answer to excessive debt is to print more money. This allows the government to pay off their debt with cheaper, less-valuable dollars. When the government prints this moneybasically out of thin air- then your savings will be worth less and less. This also forces people to work harder just to keep up with the cost of living.
Think of it as the lessons you learned about supply and demand. When supply is more than the demand, the value drops. That is what is
2. Start Saving
6Step 2: Advanced Guide to Getting out of Bad Debt
happening. There are more dollars than necessary, so the value of the dollar drops. This causes prices to rise because your dollar becomes worth less and less; this is called inflation. When there is inflation, debtors are the winners and savers are the losers.
In 2008, the U.S. government and Federal Reserve Bank began printing trillions of dollars, causing millions of savers to be losers via the loss of purchasing power due to inflation, higher taxes, and low interest rates on their savings.
The entire modern monetary system is based upon inflation. The banks and governments want inflation. Why? One reason is so that debtors can pay back their debt with cheaper dollars. Another reason is because consumers spend money faster if they expect prices to go higher.
All I am saying is thats what happens when you have an economy that grows on inflation rather than production. Savers become losers and life becomes harder because life becomes more expensive. Inflation motivates many people to become consumers rather than investors. They eat, drink, and shop, because tomorrow prices may be higher.
All that is why I tell you savers are losersexcept in this one instance:
Pay Yourself FirstStart saving your money. Yes. Save your worthless, inflation-bitten
money, but just some of it. Let me explain.
When Kim and I were getting out of debt, we knew we wanted to get out of debt FAST! We knew how to save our way out of debt, but we wanted to invest our way out of debt too. This is where the magic is.
When you get your paycheck, do not use all of your money to pay your bills. Save some of your money. As much as it hurts to say, save some of your money.
7Step 2: Advanced Guide to Getting out of Bad Debt
Kim and I saved thirty percent of our money for our future. This was not as easy as it sounds. We had to have the emotional maturity to stop buying things we did not need and eating out less. We also had to have the maturity to accept that by saving money for our future we did not have enough to pay our current bills.
It was scary.
Bill collectors called regularly. Bill collectors are not exactly friendly when you are not paying their bills. Kim and I purposely put ourselves under constant fire. That is motivation!
What did this motivation do for us? It did two things. First, we became highly motivated to find extra income and work. Second, we became very aware of opportunities all around us.