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Rank: Copper
Joined: 3/23/2010
Posts: 5
Location: Chattanooga, TN
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Hi everyone,
I'm new to the Rich Dad community. I just finished reading Rich Dad Poor Dad and have started playing the online game. I'm very excited and motivated to get out of the rat race.
Right now, I have a lot of unsecured debt that I'm trying to get rid of. I'm not using any of my credit cards and I'm paying twice as much on the credit card with the highest APR. Should I wait till all my unsecured debt is completely wiped out before I invest in anything? Or, should I invest in something like real estate to increase my cash flow and put that extra money towards paying off my debt?
While playing cashflow 101, I've been able to continue to accumulate assets even with a credit card and bank loan payment and eventually get to the fast track.
What do you guys think?
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Rank: Gold
Joined: 5/16/2007
Posts: 215
Location: Dover, DE
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I think you need to read Rich Dad's Guide to Becoming Rich Without Cutting Up Your Credit Cards.
I'm going to tie this question in with your other question about cashflow websites.
Instead of paying down your bad debt, why not buy (or create) a cashflow generating website (asset) that will pay it down for you?
At some point in the future your debt will be gone, and you will still own the asset, which will continue to put money in your pocket month after month.
"Every person is self-made, but only the successful are willing to admit it." - Micheal LeBoeuf
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Rank: Copper
Joined: 3/26/2010
Posts: 6
Location: Odessa, Ukraine
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cashflow3000 wrote:Instead of paying down your bad debt, why not buy (or create) a cashflow generating website (asset) that will pay it down for you? Good question is - how long will it take him to build and fill such a Web site with valuable information? And then it will take a year, or more to attract enough visitors to earn at least 100-200 bucks per month from adWords. You still think it's a valuable advise? :)
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Rank: Copper
Joined: 3/23/2010
Posts: 5
Location: Chattanooga, TN
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Paying down debt with assets makes sense. Rich dad says you should pay for liabilities with assets. Credit card debt is a liability.
Yeah, that's the think about websites. You have to put a lot of time into them before you can see positive cash flow. Real estate seems really attractive to me because you don't have to spend as much time creating the asset. With that said, creating websites is a skill I have and I should use it to create assets, even if the cash flow isn't huge.
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Rank: Silver
Joined: 4/5/2010
Posts: 75
Location: Las Vegas
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Time is a resource that is perishable. Ideas too have a habit of waning with time.
You should strike the iron when it's still hot. Rather than wait for eternity to clear your debt, invest now and let the returns help clear the debt. Of course you will be deeper in debt if you do not pay immediately but if your idea is workable and productive, you will be able to clear the debt even earlier than you would if you waited.
You need an expert to advise you further on the best way to go about this.
We can help. Please click the signature below to learn a whole lot more.
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Rank: Rhodium
Joined: 5/8/2006
Posts: 2,958
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Simply compare the interent rate.
If my rate of investment is higher than my internet of my debt, then I should invest frist
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Rank: Copper
Joined: 4/21/2010
Posts: 3
Location: Tallinn, Estonia
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I'd put it this way:
If you had no money, would you be willing to put your investment on a credit card? I would.
Want to educate yourself on Cashflow? How does Rich Dad make money work for
him? FREE DVD reveals everything!
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Rank: Copper
Joined: 3/28/2010
Posts: 13
Location: Cleveland, Ohio
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Hi I read the book myself and got alot out of it as well. The best advice to your question is to first create capitol to invest in your assets. If your interested in a well proven homebased business, then watch the 40 minute video at nolimitincome.ws For more information email me at jlw504@att.net
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Rank: Gold
Joined: 4/19/2010
Posts: 141
Location: New Zealand
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Compare the interest rates from paying down the debt compared t your investment return.
If the interest on the credit card is 20% could you make 20% or more from your investments? It's easier if you have a mortgage only with 6-8% then you can make better return on your investment but 20% you need to take considerable risk or be very very smart about what your doing.
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Rank: Gold
Joined: 1/12/2004
Posts: 171
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START INVESTING NOW. Use the majority of your time to develop the asset. Use the majority of your money to pay off the bad debts that either 1) cannot enter forebearance or 2) currently charge no more than 4% interest.
Use the minority of your money to begin investing. INVESTMENTS require knowledge, time and money.
You will only acquire knowledge buy STARTING NOW. Learn what the different asset classes are, how to properly buy and sell those assets, how to hedge positions, how to conduct fundamental and technical analysis. If you begin now with just a little money, it brings you exposure to these condepts, which tke TIME to learn.
Then, when your bad debts are paid and the assets you built begin returning cash flow, you are now in a position to put the money to work for you, using the investment knowledge you have already learned.
Otherwise, you will still be an investment beginner XX years from now....
Financing Reality through Precious Metals and Mining.
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Rank: Copper
Joined: 5/16/2010
Posts: 2
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There is no standard formula to answer your question. You can settle all the debts firstly before investing, or you can (just like what you say) accumulate assets, generating passive income and use the income to payoff the debt. One thing you need to learn is, what is bad debt? What is good debt? When you play Cashflow game, you should notice the 2 debts. The housing loan, car loan, school loan are bad debts as there are just spending Mortgage loan can be good and bad. If the loan helps you to acquire an asset that generating positive cashflow, then this is good debt, otherwise bad debt So, sometimes you play the game and you have an opportunity to buy real estate but your cash in hand is enough for the downpayment, you can consider to use bank loan (Woo, 10% rate) to get some finance. After deducting the bank loan interest and you still get positive cashflow, then go ahead! This is the same situation when you invest in real world. In fact, there are lots of passive income opportunity that does not need you to put money first! I notice that probably internet business is the best investment so far I know, as the operating cost is so low but the return is so high. Internet business could be a good start for investing if you have no big budget!
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Rank: Copper
Joined: 6/15/2010
Posts: 8
Location: Manhattan, Kansas
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ENP wrote:Compare the interest rates from paying down the debt compared t your investment return.
If the interest on the credit card is 20% could you make 20% or more from your investments? It's easier if you have a mortgage only with 6-8% then you can make better return on your investment but 20% you need to take considerable risk or be very very smart about what your doing. This is the approach that I am taking. If the investment is making more than I am paying on my bad debt. I really had to take this approach because my bad debt was affecting my credit; therefore, I couldn't get any more credit to invest with. One solution that I had was that I was able to take on an investment property with a partner. He is working the financing side while I will manage the property. We created a win-win situation and I get to earn passive income that will pay down my bad debt. It all starts with figuring out where you are with a financial statement, then figuring out where you want to be!
- Chance favors the prepared mind! -
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Rank: Copper
Joined: 7/11/2010
Posts: 4
Location: Staffordhsire, UK
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Hi jmeharry,
Let me give you something from my own personal experience -
I invested in an asset at the start of 2009 to increase my income and free up my time more. At the time, I was also in debt with unsecured loans and had exactly the same dilemma.
In terms of my overall balance, it only made sense to me to take 1 step backwards in clearing all my debt (by making the investment) so that I would be able to take several steps forward and increase my income.
I think that if I had not made that decision and followed through with it, I would probably still have those debts now.
Hope that helps,
Ed Hodgson
Ed Hodgson
Internet Marketer & Online Income Coach
Who is this guy?
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Rank: Copper
Joined: 7/23/2010
Posts: 3
Location: DC
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Life isn't a game... If you pay off credit cards that is a GUARANTEED return of 10-20% on your money (depending on your credit card). Whatever you'd be investing in probably won't have this guarantee. There's a risk/reward element at play here. Personally, my belief is you pay off high interest unsecured debt if you have them, as that's a sure thing. Not many of those out there, eh?
I'd certainly also readily admit this is probably contrary to the Rich Dad Poor Dad philosophy.
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Rank: Copper
Joined: 7/19/2010
Posts: 3
Location: DC
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If you place your debt (including interest cost paid over the full term) on one end of a scale and your investments on the other, if your debt out weighs your investments your wealth essentially cancels out. Eliminating debt should always be a priority if you want to build wealth and assets. I believe it's much easier to save interest than earn interest. The money you save from interest cost, put it towards earning power of more interest in investments.
Check out this "Free Video reveals #1 secret of the elite rich to easily conquer debt, build wealth and quickly pay off real estate Free & Clear ...no matter economic conditions!" http://www.cashflowmanagementsecrets.com
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Rank: Silver
Joined: 4/27/2005
Posts: 93
Location: Japan
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I see that everyone is telling you to do your investment. There are a few things i recommend you do before going this route. 1) Do your Due diligence- every good investment should have an exit strategy. You should know exactly how much you will invest and how much you will get out of it, whether its capital gains or monthly cashflow. Dont start until you have this vision in mind 2) Ensure you are not investing into another liability- if you are working something that doesnt make money when your plan states, then youve just created another liability on top of the one you are trying to get rid of. Just some things to think about LaPrentiss
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