Paying off your bad debt so you can build great wealth with only 6 simple and doable steps that i learned from one of my favorite Financial Gurus, Robert T. Kiyosaki.
When Robert Kiyosaki first business failed, he personally had over $1 million in debt that needed to be paid off. Those were hard times for him and his wife for which they are homeless and had to sleep in their cars.
Having that much debt as they did, coupled with the emotions of losing his first business, it would have been easy to roll over, get a good job, and give up on on the dream of building a successful business. It must be an awefully tempting to get back into the rat race of never-ending routine of working for money and paying bills.
Thankfully, they did not give in to that temptation. Instead they made a plan.
Using all what they had learned about money and how it worked, and looked for great opportunities to build their asset column—and eliminate their personal consumer debt—or what they called bad debt. By implementing this plan, they were completely debt free within a few years and on our way to financial freedom and in most cases all of us can be debt-free in 5-7 years.
The following are the six simple steps that they used which you can apply to eliminate your own personal debt. If you implement them, they will work. But again, discipline is a virtue most of us ignore.
Step #1 – Lock it down
If you have credit cards with outstanding balances, discipline yourself to use only one or two credit cards. Any new charges must be paid off in full every month. Do not incur any more long-term debt.
One of the main ideas from Robert Kiyosaki Rich Dad Poor Dad books is that if you take a loan personally, make sure it is small, if you take significant amount of loan, make sure someone else is paying for it.
In my opinion, like every other aspect of life, risk management is essential. Always manage your risk before any course of action. if a deal sound too good to be true, it usually is.
Step #2 – Up the ante
Come up with RM 150 to RM 200 extra per month thru proper budgeting and financial planning. If you have a good financial education and understand how to have money work for you, this should be relatively easy to do. If you can’t generate an additional RM 150 to RM 200 per month, then your chances for financial freedom may only be a pipe dream.
I would recommend that you keep track of your monthly spending. There is a lot of apps you can download and use for free on your Google Apps Store.
I personally use ” Expense Manager”.
Step #3 – Focus on one
Apply the additional RM 150 to RM 200 to your monthly payment on only one of your credit cards. You will now pay the minimum payment plus the extra money on that one credit card.
Pay only the minimum amount due on all other credit cards. Often people try to pay a little extra each month on all their cards, but those cards surprisingly never get paid off. Consistency and discipline is key.
Step #4 – Keep it rolling
Once the first card is paid off, apply the total amount you were paying each month on that card to your next credit card. You are now paying the minimum amount due on the second card plus the total monthly payment you were paying on your first credit card.
Continue this process with all your credit cards and other consumer-credit debt. With each debt you pay off, apply the full amount you were paying on that debt to the minimum payment of your next debt. As you pay off each debt, the monthly amount you are paying on the next debt will escalate. Hence, as you progress along, the less and less amount of debt you have and less and less of interest you have to pay.
Step #5 – Go big
Once all your credit cards and other consumer debt are paid off, continue the procedure with your car and house payments. If you follow this procedure, you will be amazed at the shortened amount of time it takes for you to be completely debt-free. Most people can be debt-free within five-to- seven years.
Step #6 – Build your wealth
Now that you are completely debt-free, take the monthly amount you were paying on your last debt, and put that money toward investments. Build your asset column.
That’s how simple it is. Simple but not easy.
If you feel that this sharing is beneficial to you, it might be the same for your friends. Please share it and spread the love.
Thank you and i wish you a good life.
Founder & CEO of Personalgrowth.blog and Warby.Parker.Watch.
Simple guy with ridiculously ambitious dreams.