How to change your life: Debt is a tool of the poor

We've covered several things that have changed my life, and I hope will positively affect yours. Today, I want to talk about your perspective on of the world as it relates to money. Money is one of those subjects that people don't like to talk about – because most people haven't quite figured it out yet. They just muddle along without a plan, or make decisions based on what everyone else does (or worse, typically, what their parents have done).

The basics of money management are pretty simple: in order to have a sustainable household, you need to bring in more money than you spend. And to be really well off, you want to bring in way, way more than you spend. Doesn't that about sum it up?

That's certainly a good start, but managing money goes far beyond that. Managing money (to me) means having cash for emergencies. It means knowing that every month I'm setting aside a bit for the future, when/whatever that is, and that I've got adequate insurance for both life, and health.

If you can do that with as little risk as possible, you're creating an unshakable foundation. You're investing for the future (like 20 years), not tomorrow, so who cares if the stock market goes nuts? If the housing market gets a little wonky, it doesn't really matter because you've purchased a house where the payment is 1/4 of your monthly income (or less). And, if the worst happens and you're out of a job, you've got some cash tucked away to make a payment (or 6 if you really need to).

How do you do all of this? It starts with changing your mindset on what it means to be in debt. Relax, this isn't personal, it's an observation. Remember the first paragraph? Most people don't know how to handle money, so they've done it however it happens, with no plan. Is that you? It's OK, there's never been a better time to start.

I've come to the conclusion that any kind of debt is just a hair better than pay-day loans. The major reason people use credit cards is to buy things they don't readily have the cash for. There are exceptions, as there are to every rule, but those in trouble with credit are those that leverage it.

If you're using the credit card as a living account and pay it off every month, use the debit card instead. If you're extra paranoid about your card being stolen, use a debit card on an account with $2500 in it. That way you're only out a max of $2500 while Visa works it all out and pays you back.

Sure, you can be paranoid and use credit cards for the protection, and you can extend your warranties, and you can get miles, and a million other things, but none – NONE of those are going to increase your bottom line. Simply put, they're not going to make you wealthy. They don't even help. Those are all things thought up by marketing people designed to get you to use their credit cards. Has it worked?

Saving your money, not spending it (like on, say interest), and investing your money will make you wealthy. Doing it with diligence will make it happen faster. A second income will make it happen even faster.

You're not poor, you're already wealthy, you just need to tweak a few things for it to surface. Start with viewing debt as a tool of the poor. Because the longer you're in it, the longer it's going to take you to become wealthy.

Ready to get started with your path to wealth? Wipe out your debts. All of them. Smallest to largest. 🙂