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How To Graduate with Less or No Debt

Keys_29082 It’s quite the conundrum. We are told that a college education is the key to achieving our full potential and the American dream. The story tells us it is the way out of poverty. Access to higher education was a major priority for the last White House administration and affordability was central to that message. President Obama even introduced the America’s College Promise Act 2015 to make the two years of community college free.

Over the past decade or so the number of Americans earning college degrees has skyrocketed. And so has the tuition, and the debt that follows. For many, what was supposed to be a roadmap to the American Dream turned out to be a money pit into a uniquely American nightmare. Graduates now face enormously burdensome debt that many will never be able to pay off in their lifetime. We’ve all heard reports about the student loan default crisis, where the struggle to keep up with unaffordable loan payments becomes so discouraging that people stop paying altogether.

Women are particularly vulnerable. I recently read that women own two-thirds of student loan debt. Yet a female graduate will earn only 79 cents for every dollar that a male graduate will, on average, in a similar position. Hmm…wouldn’t it be nice if that was reflected in the tuition we pay?! Blacks and Latinas tend to take on more debt, and the fact that they tend to make even less than their White counterparts makes it especially harder for them to repay.

But alas, there’s hope! There are several ways to graduate with less or no debt. At the root of decreasing the need to take on debt to advance one’s education are planning, time and diligence. Here are some things to consider:

Take your required courses at a community college. It is not necessary to spend tens of thousands of dollars on coursework that isn’t directly relevant to your major; better yet, if you don’t even know what you want to study or career path you want to take right now, community college is a great place to sort that out. Aside from the money, it can help you to grow in maturity and be more focused at a four-year college. Advantages:
1. Cheaper
2. Potentially pay tuition as you go
3. The 4-year college transcript is what will be seen on your resume and what you will talk about at parties! If you started at Community but ended up at Harvard no one really has to know.
Prepare! There are literally thousands of grants and scholarships. Take the time to do the research necessary to meet all of the deadlines and gather all of the information required to complete each application.
1. Attend events at schools and community organizations of all sorts; read books and articles on free money for college. Get to know people who do this every day and keep in touch.
2. It would be wise to start researching 18 months out from when you will begin school. This way you can target your time and energy towards the most lucrative scholarships and grants that you qualify for and are interested in.
3. Give yourself and your recommenders enough time to craft thoughtful, well-written essays and recommendations.
Consider the potential salary expectations for your desired career. Will your potential future income allow you to afford your student loan debt along with your realistic cost of living? Your grades, location, network and caliber of your school are all factors in the salary level that may be available to you.
1. This is the business of your life. Do a cost/benefit analysis on your educational goals. Does the pay scale for the career you intend to go into justify the cost of the degree required for the field? For example, if you want to be a social worker, would it be worth it to go $60,000 into debt, considering what your salary is likely to be over the long run?
2. Following the example in number 1, there are student loan forgiveness programs for certain careers.
  1. Usually when you go into one of these careers and apply for loan forgiveness there are requirements such as length of time to work in the field.
  2. Careers in public service (ex., The Peace Corps), medicine, the law and military service are all examples.
  3. For more information go here, here, here and here.
3. An often overlooked yet critical advantage of going to college is the alumni network.
  1. I wrote in a previous blog, No Man Is An Island. No one gets to where they want to be in life solely on their own effort. Everyone needs a team to achieve their goals and dreams.
  2. As I asserted in my post about opportunity, connections are key. That is the value of going to a top-tier school. College isn’t just about academics; it’s the people with whom you will build lifetime personal relationships and professional connections. Further, the higher up on that U.S. News & World Report list, the higher your earning potential will be as soon as your graduate.
  3. Going to a top school matters most in the beginning of your career. Afterward your professional record is what will really matter. Of course top school alums will always have bragging rights, whatever it’s worth. 🙂
4. Get a job at a company that offers tuition reimbursement. Consider that there is more than one way to obtain an “education.” Working in your field of interest while saving and investing as much as you can, kills two birds with one stone. Being reimbursed for the tuition you pay is icing on the cake!
  1. I benefited enormously by this incentive when I worked at Ernst & Young. I was able to grow my professional competence through continuing education classes. But they would also have paid for graduate school.
  2. Usually companies will require that you study courses either related to your specific position or the company’s industry. Length of time employed is another typical requirement. Either way if it’s your field of choice, it’s a win.
  3. The bigger the company the more likely that this opportunity will be available and the more generous.

These are just a few suggestions to get you started. There are other personal finance possibilities that I will cover in another blog. Have you been working on getting the money together to pay for college? What has or has not worked for you so far? Do you have any ideas you could add to this list? Comment below!

Read more on the advantages of community college here.

Tennessee Makes Community College Free For All Adults

Detroit Is Making First Two Years of College Free

Two Tuition-Free Years in Rhode Island

Should Students Get Grades ’13 and 14′ Free of Charge?

Paying off debt with 401K

8 Reasons To Never Borrow From Your 401K

First 2 Years of College Free

The Paper Chase

ChasingMoney Motivational posts are a big thing on social media. Type in hashtags like “motivation,” “inspiration,” “hustle,” “grind,” “quoteoftheday,” and so on, and a plethora of slick memes will show up with quotes from business leaders and motivational speakers through the ages. You will find many quotes from Jim Rohn, Robert Kiosaki and Tony Robbins, to name a few, extolling the virtues of persistence, focus, planning, how to build wealth, and the like. Entrepreneurship has exploded as the internet has made education more accessible than it has ever been. Technology has lowered barriers to entry for many industries in terms of knowledge as well as start-up capital. In theory the playing field of capitalism is far more level than it has ever been before. My inbox and social media accounts are flooded with offers to take a look at some idea to build wealth using the wonders of modern technology, usually with a rags-to-riches testimony.

Now we can “monetize” just about anything. Industries are growing for motivational speakers, business coaches and trainers, for which clever entrepreneurs will provide instruction on how to tap into the market, for fees small and large. Usually potential clients are lured into listening to the sales pitch with a free webinar or ebook download. Somewhere within the material, usually at the end, there is a sales pitch – an up-sell – to turn the free information into a revenue stream through memberships, subscriptions or further coaching. That sales pitch usually includes at least one quote from a “guru”, such as those mentioned above, to imply that the person shares that winning mentality; they have the thing that you don’t think you have. It is a very effective tactic as it taps into the deep-seeded self-doubt many of us live with; our desire to be perceived as and feel successful; and guilt over not achieving our full potential. When I was in network marketing we were taught to always search for the NEED and posit the product as the solution. The need that motivates many people to pour hundreds to tens of thousands of dollars into these trainings is freedom from the imprisonment of financial struggle.

But even with the abundance of opportunity at our fingertips there is still a pervasive sense of lack in our society. Increasing abundance of opportunity has not resulted in increasing satisfaction or happiness. Why is that?

Ecclesiastes 5:11

As goods increase, so do those who consume them. And what benefit are they to the owners except to feast their eyes on them?

gold-dollar-sign-on-ground I decided to call this blog The Financial Fashionista in part because I recognized that I myself had a conflict between my desire to acquire things and my desire to establish a solid financial foundation. I have an economics degree and experience in high and low finance. (That’s a joke.) In my head I have a very clear understanding of how money works: the concept of compound interest, investing in the financial markets, financial products and services, saving, interest expense, depreciation, the difference between cost and value. In college my focus was mortgage-backed securities, the same product that brought down the world financial markets. But when it comes to personal finance emotion is almost inextricably linked. This is why most people pull their money out of the market during a correction, as happened in 2008, marriages fail, and even cause business owners to make poor management decisions.

I am now looking very closely at the ‘why’ in my spending habits and attitude toward money in general. What lessons from my past must I un-learn? How do I bridge the gap between my rational understanding and my emotions? I have rooms full of “stuff” that I never have to look at or touch for the rest of my life. The older I get the more I realize that it is all meaningless. Whatever satisfaction I receive from purchasing a new dress or some other thing is absolutely fleeting. And as such the process must perpetuate to reach the same high.

What motivates us to do this? I know I’m not alone.

Ecclesiastes 4:4

And I saw that all toil and all achievement spring from one person’s envy of another. This too is meaningless, a chasing after the wind.

Chasing after the wind.

Another thing that social media brings to the forefront is the deep desire to be simultaneously approved and envied by others. We lament the unrealistic standards of beauty and lifestyle promoted on the medium but those who do it best gain the most followers, by which they are able to creative highly lucrative businesses. Posts and hashtags about grinding and hustling extol the value of pushing to reach goals and measurable achievements; we respect most the people who seem to be accomplishing big goals and dreams and the wealth that comes with it. But that value system is based on outward signs of a success that can disappear even faster than it came; not character or the virtues of community, humility, patience, temperance and generosity. It is inherently inauthentic. No wonder it cannot bring forth lasting satisfaction and happiness.

Motivation in this day and age is temporary because it tends to be based on comparing ourselves to others and wanting what they have. Inspiration is more authentic and long-lasting because it is based on the vision and purpose that is uniquely suited to the individual. As the saying goes, “chase your passion and the money will follow.”

The 4 Hooks of Motivational Training

Speaker at Business Conference and Presentation. I have attended many educational events – conferences, workshops, online courses and webinars – for several industries over the past few years. I was for a short time an agent for a network marketing company in financial services: I hold a Series 6 license and am life insurance licensed in ten states. Although I have gained eye-opening insight and understanding, attending these events has also been a very valuable lesson in the strengths and weaknesses of the mindset conditioning that the network marketing and real estate industries in particular use to “hook” reps and students, respectively. I have become very familiar with what I will call “motivational training.”

I believe that this style of training sprouted from the self-help movement of the eighties and early nineties. Susan Powter of ‘Stop the Insanity’ fame comes to mind. Her brand of tough love in encouraging people to change their eating habits to gain control of their lives and health earned millions from books, tickets to speaking engagements and exercise videos. During this time Tony Robbins’ star was also on the rise. He too had lengthy infomercials on how to take control of your life, but his approach was far more “gentle,” for lack of a better word, and holistic. Even though their approaches were very different, in my mind they built the framework for the motivational style of training so popular today. Ms. Powter and Mr. Robbins showed how profitable “motivation” can be.

Today, “gurus” are all over the place. They have learned to combine the tough-love and gentle approaches. They are usually people who have achieved demonstrable success at something and have built a following based on their story of how they accomplished their goals. The point and purpose of motivational training is the up-sell. These events follow very familiar layout that will conclude with an “ask” – buy a book, a course or series of courses or mentorship/coaching. Whether the story of the road to success is entirely true or not, clearly the story in and of itself can prove just as profitable, if not more so, than the work itself.

Success on hook

The following are four common “hooks” you may hear when attending educational industry events.

Hook #1: The Warning

The idea is that they will help you avoid the costly and painful mistakes that they made. This idea is reinforced by the altruistic desire help as many people succeed as possible. I am not doubting anyone’s sincerity. I just believe that we have to be our own teachers. When you have your own experience, including failures, then you are in the best position to know what works best for you, given your unique set of skills, talents and interests. And that is what a person will be able to make the most out of an investment in coaching.

The Warning:

You can’t do it by yourself
Mistakes can ruin you

Hook #2: Cost Versus Value

“If you paid $30,000 for coaching that leads you to 3 deals that earn $10,000 each or even 1 deal earning $30,000 and you can build a fortune going forward on the lessons you learned, what did it really cost you?” That would make the service in effect free. However, there is a huge caveat – “if.” If you’re given an action plan; if the coaching is personal; if the coach follows through with what has been promised; if you follow the action plan; if you are able to devote the time and effort necessary. The truth is, only about 5% of the people who attend such workshops will take action and of those few achieve the results they were expecting. For most it will be nothing more than a very large donation to that guru’s bank account.

Cost v. Value

Hand-hold coaching from an industry expert
It pays for itself

Hook #3: Impatience

We want to see results fast. Diet companies make a fortune every year on our desire to see results fast, with little effort. Patience requires discipline. Discipline involves consistent long-term implementation of a plan toward a goal. The gurus know how to tap into this tendency in our culture to want to jump ahead and enjoy the evidence of hard work, without actually doing the hard work. And that very well should be expensive.

Impatience

Huge profits in 30 or less days
Be the envy of suckers slaving away for “the man”

Hook #4: Insecurity

Many of us don’t believe we can do great things. Guilt in knowing that we are not living up to our full potential is an extension of that self-perception. Flashes of motivational quotes and inspirational videos are meant to dig into the sore spot and bring home the point that the program, product or service offers a way out. The gurus know this feeling is fleeting. We are very good at settling back into a comfortable, familiar routine. So it is imperative for the speaker to pull on the string of insecurity to compel as many in attendance as possible to pull out the credit card or take out the HELOC or pull cash out of a retirement account to pay handsomely for the promise of finally attaining the success and feeling of accomplishment that so many lack. They also know that there is at least $3trillion sitting in liquid and a little less than liquid accounts in this country.

Insecurity

Yes, this is great training, but you still won’t make it on your own
Winners recognize opportunity and take decisive action

Konferenz Saal

Now, there is nothing wrong with seeking help and inspiration. I am not at all against doing the weekend-long workshops on real estate investing or conferences by networking marketing and other companies. But I have also become hyper aware of the emotional and psychological hooks that can be very manipulative and often lead to disappointment down the road.

Remember:

Everyone starts at the beginning and there is no substitute for work.
If the gurus could do the work to get where they are, so can you.
Don’t let fear of making a mistake cost you. You can only grow from mistakes.
Don’t worry about “advice” from people who cannot relate to what it’s like to take a chance.
Take advice and get ideas from people who relate to fighting for a vision.
Take advice from people who don’t give up.
Take advice from people who have failed a million times but have the courage to get up and keep going; their failures have provided a treasure trove of wisdom and great ideas!
Don’t take advice from people who talk nonsense.
And please do not believe people who are boastful because they are likely embellishing to create envy and false authority.

The truth is that motivation comes from within. Nobody can give it to you. It requires constant self-evaluation to grow in the confidence that you are doing what truly interests you and for which you have the talent. Just because someone else has done tremendously well at something doesn’t mean that you will too, even when you give it 100%. No one thing is for everybody. We were each created for a specific purpose. If we are pursuing something that is not in line with our purpose it could remain an uphill battle. If we are pursuing things that do not engage our best skills and talents it will likely remain a very difficult journey, no matter whose advice we follow.

How to Turn Your Home Into A Personal ATM

When people think of ways to make passive income on property that they own they usually think of renting. We are not taught personal or creative finance in school so the majority of us follow the same path to try to better ourselves financially. Homeownership is the American dream. For the majority of us our home will be our most valuable possession. But it is almost a secret the extent to which a home can be leveraged – safely and legally – to attain financial freedom. The property can even be vacant.

One of the goal posts for what we have accomplished in this life is the ability to enjoy a long, happy retirement. But as the years go by and the horizon gets closer we look at what we have in cash and assets, and discover that we may not be able to retire comfortably and independently, if at all. If you add up your annual living expenses – including personal care, mortgage, groceries, car notes and insurance, all of your fixed and variable costs – you will likely find that if you retire at 67 years old and live another 20 to 30 years beyond that, you will need over $1million in today’s money to maintain your current lifestyle throughout your retirement.

Most Americans are looking for ways to supplement their income to try to make up for the shortfall. We max out our contributions to retirement plans at work. We hold 401K’s, IRA’s, money markets and other investments, hoping that the market will keep going up (which it won’t) and we don’t lose significant value in our accounts; the closer you are to retirement the less time you will have to make up for any losses. You may even try to adjust your lifestyle downward to conserve cash to save and invest but would you be able to make enough of an adjustment to make a real difference? Many approaching retirement age have to be concerned about which direction the market is headed in the next few years. In the stock market the investor has no control.

Mutual funds have for decades been heralded as the best way to benefit from the financial markets without a lot of knowledge about investing and without taking on too much risk. This investment vehicle is touted as the best way to earn double-digit returns on your money, but OVER THE LONG TERM. If you look at CD rates at bankrate.com you will see that the highest-yielding CD will return 2.3% compounded over a 5-year period. As for money markets, for a deposit of $5,000 one bank will pay a grand total of 1.11% interest for the first year only; then the rate drops to 0.61%. Meanwhile, what are banks doing with your money? They’re lending it back to you and your neighbors at higher interest rates; they’re investing it in multiple ways, including lending to other banks overnight, to earn a higher rate of interest than they’re paying you, and profiting massively from the difference.

3466307-House-sitting-on-money-with-puzzle-Understanding-mortgages-Stock-Photo

Did you know that you have the power to do the same thing? It’s called Private Lending, and you can use the equity in your property to do it. Private lending a vital lifeline for real estate investors. And as a private lender you can participate in real estate investing without “getting your hands dirty” while earning a much higher rate of return than you ever will with banks or likely will in the stock market.

Since the market crash of 2008 real estate has picked up speed, and certain markets, like Philadelphia, are moving at a feverish pace. If you are in that region I am sure you have noticed and even been inconvenienced by the deluge of construction going on in and around the city. Somebody is getting very rich! Do you ever wonder how they do it? Do you ever wonder how YOU could get in on the action, without having “important’ friends and millions in the bank?

As a homeowner you are potentially sitting in a bank of your very own. If you have significant equity built up from years of paying down your mortgage you can access it through a home equity line of credit (HELOC). You use the proceeds to help real estate investors like fix-and-flippers, for example, fund deals while you earn returns in your sleep, often well into the double digits! It is perfectly legal and perfectly legitimate. Moreover, you will be paid back your investment plus interest in four to six months. It is as simple as agreeing on a contract that explicitly lays out the terms on each side. You hold either the first or second mortgage, and if for any reason the deal goes south the house is your collateral – just like a bank. Private investing can provide virtually limitless financial growth, as you are able to compound your returns by continually lending. Did you ever dream you’d grow up to own your own bank??

Sextant Financial Solutions, LLC (www.sextantfinancials.com) is a company positioned to take advantage of investment opportunities in some of the hottest areas of Greater Philadelphia, including Delaware County and Philadelphia County West and Southwest. If you would like to learn more about ways to earn significant returns using your home’s equity or cash sitting in low interest-earning instruments such as a 401K, IRA and CD’s call 484-461-0114 or send an e-mail to sextantfinancials@yahoo.com.

Debt & Delay

It is not hard to find advice on managing money. There are print publications, websites, gurus, apps, non-profits, licensed professionals and people we know who give us their ideas on money: saving it, investing it, making more of it and how to spend it.

One of the biggest concerns Americans have about money is debt. In our consumer-centric culture we rely on interest-bearing credit cards and loans to finance non-essential wants, in the process racking up mountains of debt that we end up struggling to pay. We are bombarded with ads while checking e-mail, on social media and elsewhere designed to trigger our impulse to purchase on a whim. Temptation to consume is everywhere. But for the small business owner, being mindful of discretionary spending is especially important; the consequences of personal finance habits can have a big impact on their business aspirations.

Debt & Delay

According to the 50/30/20 rule, 30% of your income should be allotted for discretionary spending.

A disheartening consequence of having unmanageable “bad” debt is delay in attaining goals and dreams. Bad debt is debt acquired for things that have no real value. (Good debt is that which is acquired for things that we can use to increase our net worth today that could also continue to provide resources in the future; for example, a home mortgage.) Money diverted toward paying the monthly interest on balances carried forward on credit cards represents an opportunity cost both in the moment and the near future. This is especially true for entrepreneurs. Access to capital is essential to start and grow a business. Many entrepreneurs will apply for a bank loan and solicit investors for this purpose. After loan officers and investors read the business plan, they will want to assess the owner’s financial credibility. They may look at the credit report and bank accounts among other things, and usually require that the owner have some “skin in the game” to share in the risk (a certain percentage of the loan amount.) The amount of his/her own cash and/or assets that the owner is expected to have invested in the business could be sizable. Besides that, business owners always need a cushion for unforeseen hits to their budgets. Even the most motivated entrepreneur with the best ideas can have trouble getting their business off the ground due to perpetual financial constraints. An entrepreneur can spin his wheels for years and years, missing out on opportunities and delaying plans, due to large amounts of avoidable debt.

Unmanageable, avoidable, high-interest debt can cause delay in living as well. We probably all have a wish list of things we’d like to do and things we’d like to see. Travel pages on Instagram are some of the most popular on the platform. They portray idyllic destinations both abroad and at home and we can just picture ourselves on that beach or walking those shop-lined streets. A nice trip to Morocco, Tanzania, Singapore or Brazil can cost thousands. But most Americans have less than $500 in their savings account. People put off weddings until enough money is saved to have the kind of wedding they would like. In so many areas we delay living our lives to work for money to pay debt.

Or as soon as we pay debt off or down we begin the cycle again. When we don’t have the cash to do and have the things we want we often turn back to our credit cards. When we in the habit of using credit there is always something else for which to use it. If we cannot save or save less than we should, we remain cash-poor and resort to credit once again.

2017 is the year to end this vicious cycle of debt and delay! It will require discipline, planning and keeping our long-term vision in focus.

There are behaviors to void and behaviors to embrace:

AVOID EMBRACE

Impulse buying/Giving in to temptation Delayed gratification

Using credit cards Paying with cash

Lending money you can’t afford to not get back Paying Yourself First

Scrambling for money in an emergency Building an Emergency Fund

Spending Every Penny Saving 10-20% of Income

Redundancy Reusing/Recycling/Repurposing

Spending for unnecessary things Spending for experiences

Expensive outings with friends & family Free to low-cost events

Delayed Gratification: Do you have a closet full of clothes that you hardly ever wear? A house full of belongings you hardly ever use? You were probably excited to buy them. But you got over it quickly. If we choose to take the time to save the cash for a purchase instead of whipping out the credit card, after a while that item may not seem as desirable.

Credit Cards: Take a look at the interest payment you make on each card every month. Have you ever added them up? Get a monthly total of interest you pay to make it viscerally clear how much your debt is actually costing you; money that you are not able to invest into your future. Remember this feeling every time you consider using a credit card to buy something you don’t need or could put off until you have the cash.

And have $1,000 saved before attacking your debt.

Lending Money You Can’t Afford to Get Back: Judge Judy would be out of business if people would say “no” to friends and family who ask them to borrow money that they cannot afford to lend. Such a loan is really a gift by another name. A generous spirit is beautiful, but it should not cause you stress and damage your relationships. Part of becoming successful is knowing when to say “no.”

Scrambling For Money In An Emergency: On the other hand, it doesn’t feel good when you have to resort to asking family and friends for money to bail you out in a pinch. Things happen. There’s no shame in needing and asking for help. Sometimes it’s unavoidable. The best thing to do is save as much as possible when times are good, not spend it all. An emergency fund should be at least three, but ideally six, months of living expenses. Start where you are towards a specific target based on a realistic idea of how much you live on every month. But strive to consistently save 20% of your net income (after taxes), before spending or paying bills. Visit www.bankrate.com to compare savings account interest rates. I like Barclay’s.

Don’t neglect to invest – and I don’t mean CD’s!

Redundancy: As stated above, many of us have lots of stuff we don’t use and eventually forget about. It is good to take an inventory of those junk drawers and crowded basements to avoid re-purchasing items we need down the road for a project or errand that pops us. Otherwise try to sell excess belongings, especially duplicates, on auction sites like ebay, apps like 5miles, or sites like craigslist.

Spending On Unnecessary Things: A lot of times when we shop, especially women, it can feed a need for satisfaction, accomplishment or escapism. How about putting that money and effort toward investing in experiences? Concerts, art shows, international travel, charity, lessons to learn a skill or develop a talent. Good experiences that allow us to de-stress, meet new people, learn new things and really LIVE can satisfy the same needs while also allowing us to grow as individuals.

Expensive Outings: I have a small group of girlfriends that I love spending time with. We schedule regular outings to eat, go to cultural events and hang out. I found myself spending much more than I would intend to and promising myself that the next time I will stick to a budget. In 2017 I am going to be more disciplined about this. Being honest with my friends about my need to reign in spending will help me to keep focused. I have a specific saving and investing goal for the year and I am going to be ruthless in achieving it.

It can be challenging for entrepreneurs to remain motivated and inspired. The things of life can distract us and make our dreams seem farther and farther out of reach. Controlling spending and debt can help to secure some peace of mind and allow us to leap forward when the right opportunity comes about.

Debt Bad, Leverage Good

Big money stack. Finance concept

Sometimes in life a concept can either mean something good or mean something bad, depending on the person’s perspective. A word like “debt” can illicit pangs of dread or a spark of promise, depending on the listener’s mindset. The difference between the two is in some combination of observation, education and experience.

In our consumer-driven society, there is a lot of anxiety around debt. The media regularly reports on the financial habits of American households and how much we are beholden to creditors. The types of household debt of greatest concern seems to be credit cards (consumer) and mortgages. The data tell us that Americans do not save – for the most part – which is the inevitable result of the simultaneous accumulation of large amounts of credit card debt. At the same time, many homeowners are upside down on their mortgages or own homes they cannot truly afford. We are losing value hand over fist: first, to high credit card interest rates, then to loss of property value. We are trained to believe that debt in and of itself is bad, and there is no shortage of evidence that seems convincing.

But, this presidential election brings to light an important truth about debt that often goes un-reported: debt can also be good for you. One of the two candidates in this race is an unapologetic debt enthusiast. He has grown an empire built on debt (other business practices aside.) Almost anyone who has amassed a fortune in business has done so by utilizing the power of debt, but they call it leverage.

According to a recent Inc. article, “the only way to get rich rapidly is to understand the principle of leverage.” The author describes leverage as the financial secret of the super wealthy. In simplest terms, leverage allows a person the potential to exponentially increase the benefit, or return, received from putting an asset to work; it can be your time, energy, money or other resources. A person utilizing the principle of leverage has acquired more of what they need to accomplish a goal, but that additional resource is not derived from their own effort. In the case off money, the resource is, of course, debt.

Leverage is the bread and butter of the capital markets. There are many financial instruments (options, futures, etc) that increase the buying power of an investor’s dollar, thereby allowing the investor to own more shares of a company than would otherwise be possible. Businesses use leverage to operate, expand and improve when they borrow. In real estate, investors use leverage to acquire, rehab and flip properties. An investor or developer who pools funds from other investors will be able to do much bigger. Real estate investors even fund acquisitions and rehabs with credit cards (which for most people is on par with a 4-letter word.) The key to leverage in your finances is to “buy things that will appreciate in value. When you can leverage your time and your money and then put your money to work, you are on the road to riches.”

Leverage is a valuable mechanism for maximizing output and efficiency in the functions that impact profits. The author gives an example of how this works. It’s also the concept behind network marketing: on your own you will make a certain income. But if you duplicate your efforts via a team that you develop to work with you, each of whom will develop teams of their own, your income will expand exponentially. An entrepreneur may start off doing all the labor him/her self, but when he/she is able to hire staff to do the work instead, he/she will have created an opportunity to significantly increase both the client base and the amount of work that gets done within the same time frame. This way time, energy and money are leveraged, which can quickly escalate one’s income and grow wealth.

The Mortgage Is Just The Beginning…

I am in the process of becoming a 1st-time homeowner. I’ve been approved for a mortgage with a great fixed interest rate; because I’m getting a chunk of equity I won’t have to come up with a down payment; and I don’t even have to pay closing costs. Plus my mortgage payment will be very affordable. I got a great deal.

The decision to buy a home for the first time is a big one and once it is made the focus is usually on getting the paperwork and financials together to be able to apply for a loan. Applying for a mortgage itself is a bit of an intimidating prospect. And when we get approved for a loan our main focus is on what the monthly payment will be. But in reality, the mortgage is just the tip of the iceberg.

5 Things To Avoid In Your First Year of Home Ownership

Owning a home for the first time will require an entirely new set of priorities that I have literally never faced before. Perhaps the most important thing will be to expect and be prepared for the unexpected costs associated with owning a home. There will be no super to call when the roof leaks, or the basement floods or the plumbing has a problem. I will have to have the funds on hand, know who to call when I have a problem and how much I should reasonably expect a service to cost. I will also have to be financially prepared for the things I should expect, such as property taxes, garbage and sewer fees, water and insurance.

Still, it’s a challenge I am excited about and I can’t wait to get the keys and step into the pride of home ownership!