Good Debt Versus Bad Debt
I just wanna drop. I wasn't gonna do a video today, but I wanted to make a quick little video. I got this in the mail today and just putting on my snap story and stuff like that. It's from a credit union and it says, "Let the equity you've built in your home work harder for you."In the back, it says, "Use your equity in your home for things like improvements, vacations, that consolidation college tuition and more."
And it goes on to kind of explain what they can do for you or whatever. The moral of the story here is one of the big reasons we were in the problem in the mess we were in 10 years ago. One of the reasons is because people are treating their homes like ATM machines and that's not necessarily a bad thing. However, you have to understand the difference between good debt and bad debt.
Debt: Good or Bad?
Good debt if you want to take a stab at it - good debt is something that is paying you every single month. You're using some things, some money to go acquire an asset that's going to pay you every single month. Bad debt is student loan debt, a vacation, buying a car, a boat, whatever it is. Those are things that are not going to pay you. That's not an asset. It's a liability. They're not going to pay you anything. You're paying out on them every single month. That is a liability. And you know, again, I get why they're doing that. They're trying to make money right there. But, we as a society have to be smarter. I mean, financial education is not taught in schools.
This is a huge passion of mine. It's one of the reasons we have our real estate team to educate people and help them make smarter decisions. Using your home equity line of credit or home equity loan for a vacation, for a second home, a vacation, jet ski, something like that. That's just less lunacy. Go use that same equity to go buy a rental home, to go by two rental homes. Take your $50,000 and go put two down payments down, three down payments down for a rental for rental homes, and use that leverage to build you your asset column and pay you money every single month. You can use that money to pay down your debt and keep doing it over and over again. Then, oh, by the way, you've got those rentals to then use that appreciation on those equities, on those homes to go there and go do the same thing over and over again.
It hurts you
Debt is like a gun. That's like a gun. It can either hurt you or help you. You have to understand how to use it. Get educated first before you go do all that. But it takes no education to just go use it to buy jet skis or go buy a car or something for a vacation. You're just getting yourself further into debt, further into bad debt and you're on that rat wheel. You're on the run on that rat race.
So, be smart when you're doing things. Before you go do something, just think about it. It's something that I've learned over the last 10 years. I didn't learn a lot. Fortunately, my parents gave me a great head start, but the advanced really- 202 or 303 and all the different lessons I learned our last 10 years, studying them and then talking to them about them with my family, my business partners and the people around me. Having them listen to things and then them having me listen to things or read things. Then masterminding on it and then talking about it. It's really helped us help our own clients. Not only that, I mean we had last year, we had so many people that didn't end up doing selling their home because the way we had advised them with the kind of market it is. It's a very hard market for sellers because yes, we're getting a ton of equity, but what are they going to do with their home? So there's, there are different creative ways that can affect that and you can help. But at the same time, you have to give people, empower people with information that they need or at least the resources that can help them get the information they need. That way they can make the best choices for themselves.
Being smart matters
Be very careful when you are choosing your advisor and the people you want to surround yourself with because that's the information you're putting in your head. That's the kind of garbage in, garbage out, good in, good out. So be very careful. So anyway, I wasn't gonna do a video today, but I wanted to jump in really quick and talk about that cause I got in the mail and I just struck me. It's always little choices, little choices every single day. You know, should I use this debt to acquire an asset or should I use the debt to acquire liability? Should I get richer or should I get poor? Very simple, very simple questions. And there's a lot of education, time, effort and energy that goes into that process and figuring that out. But it's simple that choices right there and which way you're going to go with it.
So I appreciate you guys tuning in and your attention means the world to me. It's the most important asset we have. So I will look forward to seeing you guys very soon. Let me know if you have any questions, comments, concerns on that. Those of you in the podcast, appreciate you tuning in and we just had an awesome growth of the podcast and I just appreciate the ton of you here in Metro Detroit. Checking that out. I appreciate you guys. We'll talk to you soon.