TOP 5 Killer Myths about Debt

Top 5 Myths About Debt

Jon Hanson wrote a great book : Good Debt, Bad Debt. He made a creative and easy to understand connection with his audience using some common sense advice on how to manage personal debt. He makes the subject fun to read by using basic logical reasoning

The following list a just a peek of his priceless wisdom. Enjoy!

Myth Number 1: All debt is bad.
Reality: Debt can be a tool when used wisely to gain lasting value with a margin of safety. Its like a two edged sword used properly it can be used to acquire assets. An example is taking out a loan to make a down payment on income generating real estate. However ,if used improperly it can hurt you. Sometimes the problem with debt is not the debt per se, but a value problem —what people owe for is worthless (or at least worth less than they owe.)
For example , if you use your credit card to purchase a titanium golf club that looses half its value when you tee off. You effectively lost 50% of value and put yourself in a financial hole.
Since debt is a tool, the goal is to one day put away your tools, and have your life debt free.

Myth Number 2: Debt is just about money.
Reality: Debt takes more than just your money. Debt takes your freedom, time, cash flow and opportunities. On top of that, if you get burned from bad debt, you may fear borrowing money

Bad debt makes cowards of us all. Debt is a form of leverage, You want to be the one applying leverage. Not vice versa.

Myth Number 3: Debt is a payment for goods or services.
Reality: Debt is not payment at all; it is a claim on future earnings. It is a mortgage on your future and your time. Essentially you’re already paying for money you’ve yet to make. This puts you at a disadvantage because you might be giving up income that can be used for profitable investment opportunities. Ninety days or zero interest is not the same as CASH.

Myth Number 4: Debt is a painless route to instant gratification.
Reality: It is only painless for a season. Debt takes the waiting out of wanting, but not the sting out of repaying. Eventually you pay in cash or reputation. The insidiousness of debt is that in the beginning it gives its victims temporary pleasure. Once that “honeymoon” period is over you’ll eventually be forced to “face the music”. When that happens be ready to be in a world of pain.


Myth Number 5: I'll quit using debt later when I make more money.
Warren Buffett , the world's most successful stock market investor said : "The chains of habit are too light to feel until they are too heavy to be broken." If you have poor spending habits at a 1,000Php income, it's unlikely they will be any better at 200,000Php a year.
If you earn more money, you might just find yourself deeper in debt.
Earning more money only means more debt for some people. If every increase in income is met with new expenses, you will never be free. Parkinson's 2nd law states, "Expenses always rise to meet or exceed income."

Top 10 List for Investing in your Future

You're not a complete idiot when it comes to money. You know how to open a bank account and how to run the numbers when computing interest rates. But why do most of us find investing such a difficult subject to tackle?

Christy Heady, the author of “The Complete Idiot's guide to Making Money on Wall Street" shows us the Top 10 steps in Investing for your Future.


1. Start small, do it often. You don’t need a gazillion pesos to begin your investing program. Even 100 Php a month is a great way to start creating your wealth. In fact, if you are 25 years old and invested only 100 pesos a month every month that earned 12% a year until you retired, you would have close to a million pesos. You don’t need a lot of money to get started---just discipline. The actual habit of putting money away is more important than the amount that you put away. Once you establish the habit, you’ll have an easier time accumulating wealth. Remember before you can invest you must learn to save.


2. Think long term no matter what. Investment success isn’t rewarded overnight. Unless you were fortunate to have Uncle Henry S. to leave you a fortune in his will, you’re going to have to work at creating your wealth over the long term. Having a Long term window on your investment actually lessens your risk. Furthermore you’ll avoid making rash decisions based on emotions. Take a page out of Steven Covey’s Playbook: “begin with the end in mind.”


3. Understand that investing and saving are not the same thing. Investing your money allows you to make your money work for you as hard as you do for it. Saving your money---either in a low interest-bearing savings account or under your mattress---only guarantees you two things. Low interest and dust bunnies. Keeping your money in a inert investment vehicle also faces the insidious problem of inflation. Since Inflation has been constantly present in the past. Keeping your money under your bed will actually leave you with less buying power than when you started saving.


4. Shop around for a financial adviser and compare services. Don’t just rely on Tito Boy, the family broker extraordinaire. You’ll pay a high price for investment advice even if it’s a family member. Learn how to do your own investment research and create your own investment plan. Ultimately you save thousands of pesos in commissions and fees.


5. Treat yourself like a bill, and pay yourself first. Even before you pay the cable man, the electric bill, and your daughter’s Girl Scout dues. Pay yourself first. Put some money away. This habit guarantees that you’re putting you and your family ahead of all other obligations. It’s a great way to build your wealth!!! 10% of what you earn is a good starting point. Eventually you’ll find that you can build your savings and save up to 15% or 20% of what you earn. What’s important in this step is to prioritize the savings before the expense


6. Don’t just buy---diversify! This rule follows the old adage “Don’t put all of your eggs in one basket.” By allocating your money into several different investments, you reduce your risk. If you put all of your eggs in one basket and drop the basket, they all break --- egg yolk everywhere. Put your eggs in different baskets and drop one basket, Voila!! Only one cracked shell…. And all the others are still intact.


7. Don’t follow John Q. Public. One of the riskiest investment decisions is to make is based on what other people are saying or doing. You can listen to your friend’s stock tips or watch market gurus on CNBC but don’t blindly invest in the product without doing your research. Living in the information age gives us tons of advantages. There are a lot of financial information sources out there that are a treasure trove of knowledge. My personal favorite: http://www.investopedia.com/


8. Do your homework. It is amazing how many people spend so much time investigating what house to buy or where to go on vacation but give little time to researching their investments. Learn as much as you can about the investment, such as its performance history and how risky it is. Most of us are already capable of doing our financial investment research already. We just call it by a different name: shopping. If you want to get the best investment deal you have to shop around for the best value at the best price. This goes for all the investment vehicles like mutual funds, stocks, real estate and businesses.


9. Know that if it sounds too good to be true, it probably is. Be wary of the investment professional who tells you about a “sure thing” in which you should invest all of your money. First, it doesn’t practice the art of diversification. Second, the investment professional is probably an investment clod. A bird in the hand is worth two in the bush. Enough said.


10. Don’t let your investment keep you up at night. If you can’t sleep, Sell!! If there is an investment that is making you nervous and you can’t catch those ZZZZZs , sell it. There is not investment worth losing sleep over--- Except our children of course.

Pasig Cashflow Game Pics

Great Game Guys!