Destroy Bad Debt!
Let’s talk about bad debt and how to become debt-free so you can start growing your wealth.
We tend to overcomplicate what it takes to become debt-free with gurus everywhere giving us complicated and unrealistic strategies to pay off our debt.
Understanding how to become debt-free is really very simple. There is one simple concept that you need to understand and then you will have the tools necessary to figure out how to become debt-free!
This is also the same concept to learn how to become very wealthy as well.
Liabilities are things that take money out of your pocket.
Assets are things that put money in your pocket.
If you buy assets you add money to your pockets.
If you buy liabilities you take money out of your pocket.
It’s really this simple.
Imagine I told you there was a money machine that can print money fast then you can spend it. I tell you you can actually buy this machine but it’s going to cost you $500k to purchase.
Shut your eyes and think about this for a moment. Seriously.
You can buy this money printing machine for $500k and you will never have to think about money again. What would that mean to you in your life right now? I’ll give you 5 minutes to think about this.
Now let me ask you this. What would you do to get that $500k so you can purchase this money machine and have more money than you can spend forever? How would you scrape together the $500k to purchase this machine as fast as possible? What would you sacrifice to be able to save enough to purchase this machine even quicker?
The correct answer is that you would only spend money on necessities and the rest you would only purchase ASSETS. You would never purchase LIABILITIES because that would be taking the money you saved to buy the money machine and waste it on something else.
ASSETS is an actual money machine. Assets make you money while you sleep. Assets will print you cash for a long time. You need to purchase assets so they can make you money forever.
Your goal should be to save enough money and generate even more money to continue to purchase assets which will make you even more money. There will come a time when your assets will generate more cash than you need to live and that’s when your wealth starts to build and grow.
Once your assets are generating you more money than you need to live you can decide whether to spend money on buying liabilities and enjoying your money. Once you have the money machine you can start spending that money on things you want. Or you can choose to continue buying more assets instead of liabilities so that you can upgrade to an even bigger and faster money machine.
You would never waste a dollar on anything not necessary if you were trying to save enough to buy this machine. So don’t waste a dollar on buying liabilities. Don’t waste a dollar on things that only take money out of your pocket.
Only buy things that are necessities or things that put money into your pocket.
Next time you want to spend money on anything, even just $1.00 you should ask yourself whether what you are purchasing is taking money out of your pocket or putting money into your pocket? Is it a liability or an asset?
This is the concept you must know and internalize to be able to get out of debt. This is the same concept you must understand in order to become wealthy.
What are you doing to put together $500k to purchase the money machine? Keep asking yourself this question.
I’m going to leave off here for tonight. Let this sink in and we will continue tomorrow night.
There is actually an amazing board game I play with my family which was created to teach us how to think in this mindset. It teaches you how to think about buying liabilities vs assets, how to grow wealth to the point where you can buy the money machine, and teaches you a lot about financial management.
This board game was created by Robert Kiyosaki, author of the Rich Dad Poor Dad and while it is a little expensive it was still one of the best investments I made in my journey to financial freedom.
The game is called: CASHFLOW board game
Every time you play the game you get better at understand how to end the rat race and grow your assets and eventually become financially free. I play it and I can confirm it really works and reprograms your brain to think like the rich.