How your debt mindset can either make you wealthy or poor

It wasn’t that long ago that most people’s money mindset were focused on simply paying down the mortgage on their homes.

That was certainly the goal for baby boomers, who spent most of their working lives paying off their home loans.

Then, for many, they spent their retirement years struggling to survive on the pension.

It hardly seems fair, does it?

However, over the past two decades in particular, more and more people, including baby boomers, decided that a retirement spent in poverty wasn’t for them.

So, instead of siphoning all of their spare cash into their home loans, they opted to invest it into assets that would grow in value over time.

In essence, they transferred non-deductible debt in their home to deductible debt in investment properties.

When debt is bad

There is no doubt that financial literacy has increased over the past few decades.

Today, most generations have a better understanding of how to improve their financial futures, including knowing the difference between good and bad debt, because not all debt is of the negative kind.

Bad debt is when your credit card is always maxed out every month because you can’t stop yourself from overspending on things like UberEATS and you never have the money to pay off the balance every month.

It is also debt such as personal loans that are used to buy cars, that you often don’t really need, but are lumped with a double digit interest rate that will see that price that you paid skyrocket to far more than it was ever worth.

A new form of bad debt has arrived recently, too, which is short-term lending on discretionary items like a new pair of jeans through services like Afterpay.

Of course, it’s promoted as having no fees attached – and it doesn’t as long as you pay the required instalments on time.

If you don’t, well, then you’ll be hit with various late fees.

It’s yet another way that people who are prone to overspending are kept on the bad debt merry-go-round.

When debt is good 

Good debt, on the other hand, is borrowing other people’s money (such as the banks) to make money.

As Robert Kiyosaki, author of Rich Dad, Poor Dad, says good debt is used to buy money-generating assets like rental properties.

Further, Kiyosaki has always advocated leveraging and using real estate as a primary builder of passive income and wealth.

Kiyosaki’s famous book was released more than 20 years ago, which is about the same time as people in Australia became more interested in investing in property as a wealth creation vehicle.

Today, there are about two million property investors in Australia, however, about 70 per cent only own one property.

Now, that’s often because they have selected the wrong asset or location for their first investment and are stuck on the sidelines because of it.

Savvy investors, though, select the locations, and the properties, with the very best chances of capital growth over the medium- to long-term.

If they don’t have the knowledge themselves, well, they work with experts like us!

Regardless, by optimising their investment property selection, they are then well placed to reuse the equity growth in a few years to purchase another asset – and so on and so forth.

Of course, this has always been a sound investment strategy, but even more so at present with historically low interest rates meaning that the value of your money in the bank is going sideways at best.

A recent example is one of our clients who purchased his first investment in Victoria for $330,000 and has made $140,000 equity in less than two years along with yields of six per cent.

This first investment allowed him to leverage into his second investment shortly after – buying in Queensland for $325,000 with a yield of 5.92 per cent.

That is an example of wealth creation using good debt right there.

PRIVACY POLICY

Respecting your Privacy

Your Property Your Wealth Pty Ltd (YPYW) is committed to supporting the Australian Privacy Principles for all fair handling of Personal Information which set clear standards for the collection, use, disclosure, storage of and access to Personal Information collected during the course of business operations and compliance with the Privacy Act 1988 (Commonwealth) and its amendments (the Act), and the Australian Privacy Principles (APPs) set out in that Act. You can see the full text of the APPs online at the Office of the Australian Information Commissioner’s website at:

http://www.oaic.gov.au/privacy/privacy-act/the-privacy-act

Personal Information means your name, mailing or residential address, telephone number, email address and other transaction and registration details including the company you work for and your role and financial information, including credit card information and information collected from credit reporting agencies.

Our respect for your rights to the privacy of your personal information is paramount.  We have policies and procedures in place to ensure that all personal information, no matter how or where it is obtained, is handled sensitively, securely and in accordance with the APPs.

This Privacy Policy sets out:

  • What sort of personal information is collected and stored;
  • How information is collected and used;
  • What happens if you choose not to provide the required information; and
  • How you can request access to the personal information we hold about you.

From time to time it may be necessary for YPYW to review and revise this Privacy Policy. We reserve the right to change our policy at any time. Amendments or replacements of the Privacy Policy will be posted on our website.

Collection of Your Personal Information

We only collect personal information relevant to our business relationship with you so that we can provide our services and products. We may collect your personal information:

  • directly from you including via telephone, email or facsimile;
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  • when you place an order or service request with us;
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  • any correspondence we receive from you.

Is your personal information secure

Where you submit personal information, we manage it by using up-to-date techniques and processes that meet current industry standards to ensure that your personal information is kept secure and confidential. We also take measures to destroy or permanently de-identify personal information if it is no longer required.

Use and Disclosure of Personal Information

You acknowledge and consent that by providing your personal information to us that we may use and disclose your personal information for the purpose for which it was collected or for a related or ancillary purpose such as:

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  • to our successors and/or assigns

What happens if you do not want to disclose personal information?

You have no obligation to provide any personal information requested by us, but if you choose to withhold personal information, we may not be able to provide you with the products and services that depend on the collection of that information.

Removing your personal information

You may contact us at any time in writing and request that we remove and delete your stored personal information.

Providing Personal Information About Another Person

You represent to us that where you provide personal information to us about another person, you are authorised to provide that information to us, and that you will inform that person who we are, how we use and disclose their information, and that they can gain access to that information.

Linked Sites

YPYW’s website may contain links to websites which are owned or operated by other parties. You should make enquiries as to the privacy policies of these parties. We are not responsible for information, or the privacy practices of such websites.

How can you access your personal information?

You may in writing request access to personal information that we hold about you. We will provide you with access to personal information in accordance with the Act and APPs and we may not grant you access to the personal information that we hold where the APPs allow us to do so. If you are refused access to information, we will provide you with reasons for the refusal in writing.

How to contact us

If you have any questions in relation to privacy, please contact us on 0490 912 045 or email Daniel Walsh – admin@ypyw.com.au. For more information about privacy law please visit http://www.oaic.gov.au/privacy.

High-Performance Property Investment in 5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh