I believe that debt if addressed intelligently is an excellent strategy to consider. Here are some of the following examples where I believe debt is appropriate.
Take the net income (gross income less all expenses) earnt from the investment. Divide the income by the interest you will be paying. For example if a property is worth $500,000 and is rented for $26,000. Holding costs are calculated to be $4,000pa (rates, insurance, management fees, strata etc). If the loan interest is 5% then divide this by $22,000 ($26,000 gross rent less $4,000 expenses). The loan amount therefore for this property investment to be neutrally geared is $440,000. For this investor to have no additional ongoing out of pocket expenses $60,000 deposit is required (plus purchase costs & stamp duty). Note the investor should also be mindful of the opportunity costs (lost/gained) of their deposit & fees as they are now tied up within the one investment.
Considering a career/business future may be another 20-30 years. If your income increases by $15,000 per year from a more specialist role, or you can qualify for a higher pay grade, then over the space of 20- 30 years your return on investment would be over $300,000- $450,000. In this light I believe borrowing to invest in your own career, intellectual advancement or greater business income whilst still a debt, it’s definitely a better debt than a worse one.
The saying "You can't cut to greatness" is as true for business as it is for our own financial goals.
However I want to share with you some simple activities you can implement, delivering great savings, whilst maintaining your current quality of life and helping you achieve your financial goals sooner.
Feel free to add more helpful ideas in the comments area.
Creating wealth is counter intuitive, if you want to keep it long term.
True wealth is more than just a bigger sum in your bank account, however the following will help you accelerate it, keep it longer and enjoy it more.
The following are five things you can do now to substantially increase your wealth:
1. Invest time in more bonding experiences with your partner and those important to you. These experiences don't have to require additional spending (think a walk, make a meal, conversation etc…). Why do this? Well divorce is the fastest way to loose half or more of your wealth, not including the emotional distraction and financial cost rebuilding your life. This goes for business relationships and work environments.
2. Invest in yourself. This means better health, career education/research, money management/ cash flow & savings, spiritual growth, contribution to others lives. You will find greater peace and personal happiness. Additionally you will have less need and desire to take greater risks, whilst having more time to enjoy living life to its fullest.
3. Discover, give and help other people get the things that are important to them first (not what you want and need first). As the saying goes by Zig Ziglar "You can have everything in life you want, if you will just help enough other people get what they want".
4. Discover your "BeCause". When you know your core values and make choices aligned to these values you increase your chance of success and have directly improved your quality of life.
5. Let go of your past failures. We know we cannot change our past, however we can change our future doing the activities that create success and work towards. "The best thing about the future is that it happens one day at a time"Abraham Lincoln". Do what you can do today. Time will pass whether you do or do not.
I think offering a set of rules is a good thing - they help maintain order inside an organziation. Understanding the value of such guidance, I recently issued a set of rules to my team.
Allowed to Do Rules. Rules to help push people forward rather than hold them back. In our team, the rules consist of a list of the things that are allowed.
We call them the Allowed to Do Rules, and this is what it says.
You are allowed to:
1. Make the decision you think is the right decision to make
2. Start something that needs to be started to help advance the cause
3. Ask for help whenever you want it
4. Help others whenever you can (even if they don’t ask for it)
5. Take time off to do something that inspires, excites and energizes you
Everyone is expected to follow these rules and everyone is expected to hold the others accountable to them. Afterall, if we didn't follow the rules...there'd be chaos
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