The title may seem like an oxymoron and to some extent impossible. How can debt be used as a medium to create more wealth? Actually, it isn’t an oxymoron and if you want it to make sense, you need to change your perception of debt and classify it into two different categories. According to the conventional notion, getting into debt may ruin your future. However, there are situations where getting into debt may actually end up securing your financial and social future. Let’s take a look at both to know how to turn debt into wealth.
First, let’s discuss the types of debt you’re acquainted with. There are basically two types of debt – good debt and bad debt. Bad debt is a kind of that most of us incur due to a habit of overspending. Sometimes, we get caught into the trap of commercials and buy things that we really don’t need. Often, we try to live beyond our means or far beyond our budget and by this, hail troubles for our future. Moreover, with poor money management and household budgeting skills, debt quickly springs out of control. Therefore, bad debt is common among people who have just started with their financial lives.
The second kind of debt is far different from the previous one. This kind of debt becomes visible whenever you invest in something. A very comprehensive example of this kind of debt could be your home mortgage. Though your mortgage never provides you with good return unless the value of the property increases, it obviously gives you emotional return and a good lesson about using debt to live a better life in the long run. This is just an introduction as how good debt can help you grow wealth.
There are many other ways through which you can control your debt to create other streams of income. Suppose you are sustaining on a monthly income and have the opportunity to invest in stocks. You can put some amount aside from your paycheck and buy stocks with it, but it would be hardly enough to purchase one share. You can let this great opportunity pass, or grab this debt to have satisfactory stream of income in future.
What is acceptable? Drowning into a little more debt to attain huge returns in future or spending the rest of your life wishing you had the require money before the stock took off? Perhaps the first one! If managed wisely and used for right reasons, debt can be a very powerful tool.
If you want to make some money, you first need to have some. Unless you’re born with a golden spoon, it’s obvious that you have to work hard to earn some bucks in order to invest. By controlling debt properly, you can easily achieve your dreams. Just make sure you don’t exceed your limit and don’t make any bad step.