Good Debt vs Bad Debt
today we’re gonna talk about something that lights me on fire. We’re going to talk about good debt and bad debt because there’s only one word and most of us do not know the difference between them
the difference between good debt and bad debt and the difference between understanding this is the difference between knowing how to make massive amounts of money or keeping yourself trapped in a place that you may never get out of
Let’s just say that you actually have a little bit of money. Let’s say that a house came along and you can purchase that house for a $160,000. The value on the house is $200,000 so what’s the equity spread? it’s $40,000 and that equity spread is almost always going to translate into a good healthy cash flow. So the two of them usually go hand in hand. You’re not gonna find an equity spread and the only way that you’re gonna get a minimal cash flow is if for some reason they got a really bad loan on with the bank and have just a really high interest rate. Well if you were to take this spread scenario and let’s say that the person said I’m willing to do this deal. Yes it’s gonna cash flow you $400 a month and if were to buy this traditionally, what kind of down payment would you need to bring into the table? What standard?
20% on a $160,000 closing cost is going to be around $35,000 – $38,000
This person says “I’ll be the bank” that’s what you’re asking them to do. I’m going to assume the loan and they’re saying “for me to walk from my house because of my circumstances or my needs, I need $5,000 “
Now as opposed to $38,000 how do you feel about $5,000?
Well, let’s say that within 60 days, you had to pay 2 mortgages but then in assuming this house, let’s say that what ended up happening is you ended up collecting a $5,000 down payment on the house.
What’s just happened here with what they needed and what I got? What’s happened here?
It zeroes itself out. let’s say I borrowed that $5,000 from my credit card did you know you can buy a house with a credit card? and you’re thinking oh but Kris, credit cards have really high interest rates. No. Credit cards are investment cards. They are tools. Creating wealth is always about creating higher yields than you borrowing the money for. Yes? getting deeply into business debt, good decision or bad decision?
What Is a Good Debt?
Listen, consumer debt you want to avoid like the plague. Business debt, you want to create like there’s no tomorrow. you want to go crazy with your business debt why?
I’ll show you why right here. I put $5,000 on a credit card “urgh! I just got $5,000 of debt”. No you didn’t! you’re getting $400 a month on your money. In 12 months
What’s $400 times 12 months? $4800! in one year I made a 100% on my money. Paid it off. Now my credit card debt is gone. The next year I make $4800 I made a 100% the next year. The next year I’ll make another $4800
Do you see? do you see what you just did with your “debt card”? I love business debt. Like I’m loaded up to the max in business debt.
Have Total Control
Now, you might be someone saying “I’m cringing to death”
Let me give you a scenario. For the person that’s cringing to death, let’s say you have $100,000 on 401k or an IRA and you’re being a little good boy and girl that’s been told your whole life that take that money and you need to put it in this account because your financial planner told you. Because they’re planning for you to fail. Right? you’re being so good by putting that money in your IRA you can’t control it, you can’t touch it and every month that pays you nothing! this is why we love 401k’s or IRA’s. You’re too stupid to have your money. So give me your money, and if you try to touch it we will penalize you.
Think about it
I hate 401ks and IRAs. I hate annuities! It’s like “give me your money so I can pay you nothing. If you try to touch it I’ll use fear and scarcity”. You can’t have your money, you can’t handle it. it is so crazy that we put our money in these doomsday demon devices!
Debt is Good for the Economy
I have a factory in Guadalajara. It’s been run, owned and operated for 50 years. It produces widgets that gets sold all over the world. This factory takes care of 300 families a month and this is a 2 million dollar factory. It’s a 2 million dollar factory and the cost of this 2 million dollar factory. It cost $20,000 dollars a month to keep this factory up and going and it has a 50 year history of every single month making $40,000 a month. This is 2 million dollars of debt that feeds how many families? and produces a product that apparently people all over the world need.
Without debt we would not have an economy.
Who wants this deal? are you kidding me? do you want to even begin calculating your IRA? your ROI from your IRA into this? are you kidding me?
This is what wealthy people do. Without debt, we would have no economy. There’s good debt and bad debt. How do you know the difference?
Good Debt and Bad Debt, What is The Difference?
A bad debt actually will cost you money so the reason why we avoid it like the plague is because every day I have my consumer debt, I go deeper in the hole. I moved backwards with one debt but a business debt moves me forward. Do you want to make an extra quarter million dollars a year? Would you pay a hundred thousand to get an extra quarter million dollars a year?
Who wouldn’t? that’s s 250% ROI on your money each year compounded over 10 years are you kidding me? business debt is your friend. If you’re going to get into real estate there’s a concept you’re going to have to face and it’s debt.
The Bible and Wealth
Let’s take a moment t and get Christian for a minute. For the Christians, let’s actually talk about this idea of wealth. “Wealthy people are going to hell and their stinking rotten rich and you can’t make it to heaven”. Dissect your scripture and you’ll find that 4 out 5 verses says from Lord Almighty, “I want to give you everything”. “I want to bless you with endless abundance and prosperity, please do these things and keep these commandments so that I can open the windows of heaven” and give you how much? All.
We get crazy about this idea of rich people going to hell because of course there’s balance. Of course we get our warnings but that’s not the doctrine. That’s a warning. The commandment is to seize your birthright of what? abundance and prosperity. Stop being so proud of your poverty. The funniest thing that what happened to me when I entered into wealth is that I started realizing that the pride of the poor is far greater that the pride of the rich.
The poor people get together and you know when you’re with them because they say, they always talk about the wealthy people in their evil decisions and how they’re egotistical and narcissistic and they only care for themselves and the money is all about them and you know what happens when you get to the wealthy and you look at the other way and you get a chance to see both sides of the rainbow? one stinks and it is rarely the wealthy side.
I’m just presenting you with some different information I got. A perspective on wealth and abundance. I got a perspective on my birthright and my entitlements the things that I am entitled to just by being a human being here on this planet promises that have been made for me from ages beyond, and will continue be made.
Learn to be a giver and receiver of value. Money always follows. Change lives, solve problems, help people but stop putting your hand up saying no to the money. It’s a mixed message that says I want nothing and if you have any beliefs in your mind that say I can’t, I shouldn’t, it’s not right, we don’t have enough, that’s a mindset problem and it does need to get addressed.
You got to make a choice. You’re not doing so well with the foot in both doors. That business debt is blessing your life and it will treat you well.
One word, two opposites, debt. There’s a good version and a bad version. One makes you, one losses you. One grows you, one takes away and destroys.
So I just want to ask you right now, do you want some business debt?
If you’d like help creating a game plan specific to you?
We offer a free game plan consultation. I look forward to talking to you, to help you figure out your own plan of how you can invest in real estate with no money, like I did.