Download - “AND HOW YOU CAN TOO!”

2 ELITE MEMBER INSIDER SERIES HOW THE RICH USE DEBT AS AN ASSET

CONTENTS “AND HOW YOU CAN TOO!” ......................................................................................................................... 3

THE ONE EVERYONE WELCOMES ................................................................................................................ 5

WHAT'S IN YOUR WALLET? ............................................................................................................................ 7

GOT ENOUGH GAS IN THE.. BANK? ............................................................................................................ 9

IT'S NOTHING PERSONAL… IT'S JUST… .................................................................................................... 10

HOME SWEET… EQUITY ................................................................................................................................... 11

STILL A HOME… BUT NOT YOURS... FOR LONG ..................................................................................... 13

CAN YOU BUY THIS STOCK FOR ME? ....................................................................................................... 15

THE BEST INVESTMENT OF ALL .................................................................................................................... 16

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“AND HOW YOU CAN TOO!”

Debt is a word that is known world round. Regardless of location, ethnicity, beliefs, or values, "most" of the world's population cringe when hearing the word.

We say "most" because not everyone shares the same views on debt. There is a small majority of individuals who welcome debt as a wealth-building strategy.

Debt and wealth in the same sentence? Used in a positive context? Let us explain...

As with anything in life, our beliefs and values are usually shaped by our experiences. And unfortunately, since the majority of the world's population has had negative experiences with money, more particularly debt, a generational belief has been formed around it.

This paradigm has been passed down through generations from hundreds, even thousands of years ago – well before currencies like the USD and EURO were used as medians of exchange.


And what's even more interesting is that the wealthy have been using it to their benefit for just as long. So how is it that one group of individuals hate debt, and the others love it? It's all about perspective!

When we hate something, it is usually a burden or hindrance to us in most cases. The vast majority of those who are in (or who have been) in debt is due to lavish spending, living outside one's means, and, or, a lack of discipline.

For example – a story that you have probably heard before, or one similar about that person who drives a really nice car, lives in a vast home, is always spending money and looks happy, but in reality, is so far in "debt" – that they don't believe there is a way out.

They work over-time and then some just to try and stay afloat. Paycheck comes, and the party starts. Weekend blunders and senseless spending all for what they think is "fun." By Monday of the next week, they are already without money once again.

The cycle continues while they pinch every penny to make it another week or two until the next paycheck – and then they repeat. They enjoy two to three days out of fourteen and for those remaining eleven to twelve days until paycheck - anxiety, regret, guilt, shame, and a temporary change of mind to do better next time.

This was an extreme example, but these cases do exist. Our point is that when this type of debt rules your life, you become a slave to it, and in many times a resentment towards it follows. Thus, generation after generation "all debt is bad debt" is the belief that's passed down – and that's understandable considering the circumstances.

However, with just a slight shift in perspective, an open mind, and the commitment to do better, they could be truly enjoying life, happy, not living paycheck to paycheck, living their best life… Just like the wealthy!

So! How does the wealthy use debt to help them instead of hurt them? Well, they view debt as an asset, and as we all know, the more assets, the better! Now you're probably wondering "which particular assets," right? Well, then let's get started!


THE ONE EVERYONE WELCOMES

Well most… Especially parents! Even if you thought you were too cool for school, your parents didn't, and college was usually the anchor driving the conversation. Of course, all parents (or most?) want their children to get good grades for many reasons.

But when high school rolls around, not being accepted into a desired or prestigious college is the main driver for achieving good grades. Parents push their children to get good grades so they can go to a good – expensive college which in most times results in student loans.

Student loans are a type of debt that the rich consider to be an asset. Although the student loan is not necessarily an asset that pays monthly dividends or is categorized as a passive income investment, it is viewed as a long-term investment with returns that usually result in a high paying career.

A true definition of investing in yourself. Whether the tuition is $10k or $100k, the wealthy understand that a reputable degree attracts higher-paying jobs where one year's salary may be enough to pay off a $100k student loan.

Of course, a reputable degree doesn't always guarantee a great job, and the past few years have proven that. There are even individuals with master's degrees that have a hard time finding a job that aligns with their degree, and in most cases, they end up working in a different career field.


The rich are very aware of this; therefore, they are strategic and purposeful with the degree path that they seek to accomplish or recommend to others. This is a great starting example of good debt. It's a belief that has become so commonly shared by others that it has almost become a must.

The next example usually comes during or after college (if one chooses that path) but is one that is a fork in the road for most from the good vs. bad credit perspective.


WHAT'S IN YOUR WALLET?

Hopefully, not a few maxed out credit cards! No, but seriously, this small piece of plastic has the power to change one's life and future for the best or worse. When we think of credit cards, it's also common for us to think of purchasing items that we couldn't afford without it, or expensive trips and such.

And that's precisely where the problem starts. Again, it's all about perspective, right? Successful people use credit cards not to rack off debt on material possession but on assets.

The choice they see is this; "Charge this expensive designer shirt to my credit card and end up paying 8% more for it with interest and payments than it is advertised for in the stores? Or charge a book, course, certificate, gas, *necessary food* and other like items to the card?

The choice that will benefit your life the most should be clear after reading the above options to choose from. A decision that is easy once we are reading it on paper, but the problem lies in our emotional reactions when it should be logical thinking first, then react.

Again, charging necessities to a credit card like food, gas, and even rent is a great way to build credit while receiving the essentials in life. The catch to this is paying it off as soon as possible. The goal is not to accrue additional interest, fees, or penalties.


Most credit card companies offer reward points and perks for loyal, active members. Some individuals maximize this game by opening multiple credit cards, paying for an item with one card, and then paying it off with another (or multiples) and then paying it off immediately.

This is a great way to rack up on free travel, lodging, and food points! Again, what is technically considered debt once charged to the card, are also everyday items that we would be purchasing regardless. However, just because you have an open credit limit doesn't mean you have to or should use it all.

As we stated earlier, credit cards are usually one of our first experiences dealing with credit. How It's treated at this stage will affect the next point we are about to cover.


GOT ENOUGH GAS IN THE.. BANK?

Usually not at the time we are buying our first car (or 2nd, 3rd, 4th). Even if we choose to buy a used car, some level of financing is commonly involved. If you weren't taught the importance of credit, this can be a heart-breaking moment.

"Most" of the world is set on obtaining their dream car as soon as possible, even if it's their first car. They are willing to sign the papers no matter how high the monthly payments are. What's the interest rate? Who cares! As long as they can walk out the door with what they want.

And so the three to five year struggle begins. A high monthly car payment paired with high insurance rates (which were probably not taken into consideration along with any other financial obligations.) All this just to look and feel cool at what cost?

The rich? Well I'm sure that you've heard the stories of billionaires who have been driving the same car for 20 years. No upgrades, just maintenance. The rich who fall under this category treat vehicles as a simple means of transportation from a to b. It's only or main purpose is to get them where they need to go, as simple as possible.

And then there are those who purchase vehicles via a car loan and turn around and make money with it! Services like Uber, Lyft, transporting and more. If you are saying "I've never seen a billionaire driving for uber," well then, we'd have to agree with you.

But there have been plenty of wealthy people that started with this mindset and even employed others to operate these assets in order to generate them their profit. That's exactly how the Taxi service started. And this leads us into our next topic perfectly.


IT'S NOTHING PERSONAL… IT'S JUST… Business! Many new businesses start day one in the red – and are as happy as can be! Why? Because many businesses are started with the help of a small business loan. If these aspiring business owners did not have this resource available, their dream of owning their own business might have never come true.

Truly a scenario where it takes money to make money. Even if a business owes money on a particular item (usually a liability), their goal is to make enough money with that item to pay for its monthly payments and then have profit left over for themselves.

Done enough times, consistently, and they would have eventually paid that item off completely. Any income that items produced from that point on is pure profit. It is at this level where businesses really begin to take off.

Essentially, what they did, like every other example we covered and will cover going forward, is leveraged debt. If they decided to sell the item after paying it off, they more than likely wouldn't get exactly what they paid for it; they would get more!

Every month that they were able to make their payments and have profits leftover was a month where they built equity in that item. Let's say that a farmer bought a tractor for $100k. He put $20k down and secured a five-year loan with monthly payments of $3k.

That farmer did pretty well over those five years and was able to obtain a monthly average income of $5k. As soon as he paid it off, he decided to sell it for $50k, which is only half of what he paid for it! It may sound like he lost $50k at first glance.. but let's dive deeper.

If he made an average of $5k per month for 60 months (or five years) with his tractor and owed $3k a month on it, then he would still have $2k left over In profits every month. Take the $2k and multiply it by 60 (or five years), and you get $120k PLUS the $50k it sold for, equaling $170k.

The farmer made a 70% return by financing his tractor! Of course, most farmers would not sell the tractor and keep it in operation, generating even more equity and income. Besides, as soon as it is paid off is when the fun really starts!


HOME SWEET… EQUITY

One of the more controversial debt debates is a home purchase. Some argue that it is one of the best investments that anyone could make, and others say that it is renting. A home can be either-or. There are many factors that come into play when trying to make that determination.

When you purchase the home (is the housing market up or down?), how big the monthly mortgage payments are, how much is needed in renovations (If any), is there an HOA, etc. Wealthy individuals' study, analyze, and compare these options against each other.

They look for the deal that makes sense and dollars. It may not be their dream home, but it may help get them there. If renovations are needed, they don't go overboard with them, just enough to function. The monthly payments they make minus the principal, all goes towards the equity.

It's the same concept we used with the farmer. By this time in their lives, they have been able to obtain (through hard work and sacrifices) a respectable credit score, which will tremendously help them negotiate the financing terms, which in return helps with the amount and speed at which they can build their equity.


There are even those who rent or lease a portion of their home out to others, whether that's by obtaining roommates, or through other methods that have become wildly popular over the past few years like AirBnB.

Sure, it can be uncomfortable for them at times, and just like anyone else, they would probably prefer to have the whole space to themselves… But again, we emphasize the importance of Sacrifice!


STILL A HOME… BUT NOT YOURS... FOR LONG

Real estate investing is a platform that has been preached about for decades upon decades by some of the wealthiest individuals in the world. At one point not too long ago, it was said to be that 90% of every single millionaire held real estate assets in their portfolio.

They become the bank and landlord. If it is a second home, they will get the high financing rates just like they did on their first home and then rent it out to renters for a premium. If their personal monthly mortgage on that home is $700, they may ask for $1,100 monthly from the renters.

That's $400 of extra, passive monthly income for essentially just taking a loan out. And the perks don't stop there. The renters are paying their monthly house payment, principal, equity, and then some for them.

On a larger scale, we have CRE, or commercial real estate investing. Think apartment complexes, warehouses, storefronts, and more. Every scenario above is very similar to financing a single-family home with a few exceptions.


CRE investments require a higher down payment, require more due diligence, and a bit more knowledge of investing primarily in the real estate niche. That's not to say that brand new CRE investors aren't successful. Everyone has to start somewhere, but the wealthy simultaneously build a team while expanding their experiences and knowledge.

Purchasing and leasing out an apartment complex is again similar to renting out a second home in terms of the profits. Only this time, instead of having one tenant, they have dozens and sometimes even hundreds. In our single-family home example, the homeowner was generating an additional $400 per month from that one family..

Imagine if they had an apartment complex with 100 families, making $400 a month off each after paying their apartment mortgage to the bank they financed it through.


CAN YOU BUY THIS STOCK FOR ME?

Switching investment vehicles, we have investing in stocks through margin or borrowed money. High risk, high reward. This method is practiced (successfully) by the most advanced traders and investors. They have built a solid winning track record and are confident enough to borrow money to invest.

They do have to pay interest on a margin loan that accrues daily. However, these traders are not (realistically) expecting, nor are they looking for the next TESLA stock that jumps up over 300% in a few months.

They "scalp" trades, or simply look for small opportunities to make a quick return. These returns can range from 3% all the way down to below 1%. It may sound minuscule, but they are making money off of money that's not even theirs!

Again, this is extremely risky, to say the least. Most institutions have a checklist that investors have to pass in order to gain margin privileges. You do not have to be a licensed stockbroker to exercise margin, but years of experience in the trading world is highly recommended.

Mishandling or mistreating this type of privilege can drastically change one's life for better or worse!


THE BEST INVESTMENT OF ALL We talked about it before, the best investment that you can make is in yourself. It is for that reason why successful individuals may take out a personal loan from time to time. Again, this loan is not for a lavish vacation or shopping spree.

A small project, trying a new investment, funding an idea they had for an invention, and so on. And of course, by the time that they reach this level, banks are drooling for their business. The lowest possible interest rates with flexible conditions.

It's not rare to find these types of loans attached with a 0% interest fee for a set period of time. They remain aware of this time period and make sure that the loan Is repaid before then, maximizing and leveraging their debit out to its full potential.

There's a common theme here. Discipline, Sacrifice, going against the grain and taking calculated, educated risk. They acquire money through their profession, and then before spending it on liabilities or material possessions just to satisfy their ego, they put it to work.

Make your money work for you! If not... Then you spend your whole life working for money, and it becomes your master.

Instead, you want to be its master! This is genuinely how the wealthy use debt as an asset. As you can see, it's nothing really unusual or a new invention.

Its simple habits practiced over and over throughout different scenarios. How has your perspective changed? Which one of these examples can you begin to take advantage of immediately?

Maybe having to start with a credit card or even change your spending habits with your current one is the best option for you. Remember, there's no shame in "starting over" and trying again. But there is shame in not trying.