The Principle Of A Debt-free Life
Most of us dream about being wealthy. Most of us are not. Conventional wisdom and dreams about winning lotteries have not helped us reach this goal.To reach millionaire status, you have to either be aggressive about savings or aggressive about entrepreneurship. Which one do you think you -and much of the world's population - are most suited for?"
The key to ensuring that you are able to save and invest enough money is moderation; be realistic and live below your means. This sounds like a no-brainer, but given the amount of debt many of us have and our abysmal national savings rate, it is not. It is a simple concept but one that requires shifting your priorities and values from spending to saving.Having a great salary does not guarantee wealth. If your income is not sufficient to cover your expenses, you obviously will not have money to save and invest.
The reality many of us do not want to confront is that how much we spend is more important than how much we earn. A person can easily earn a six-figure salary, yet paradoxically be in debt. Americans earn more than most of the world's population, yet we are also in debt more than most of the planet's citizens. It is not hard to spend more than you earn, and if you do, you will get caught in the desperate cycle of living paycheck to paycheck and confronting the specter of mounting debt and braying creditors - which is a black hole that you should avoid at all costs.
Living in debt is more expensive than living debt-free. While there are good debts, such as education or buying a house, most of us are wallowing in bad debt. Going into debt for consumer items is bad debt because most consumables depreciate rapidly once you buy them. Furthermore, your debt keeps rising when you finance consumable purchases with a credit card. How? Well, many people get into the trap of paying the minimum amount owed on their credit card, meaning they are basically paying the interest and not the principal (the actual purchase price) of what they are buying. As a result, their debt keeps rising, especially if they get into the habit of buying regularly on credit and not paying the full amount owed each month.
So what do you do when you really need the laptop or 45-inch flat-screen television and you have already spent your paycheck on mortgage repayments, groceries, gas, kids clothes, and various other payments? For an answer, as well as more information on personal finance, savings, debt, credit, and wealth management please read Debt Zero: The Financial Mediterranean Diet by Edward Prados.
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