Monday, 30 November 2015

RULE 40: Payoff Your Loans And Debts As A Priority


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Peter Ayodele Fayose, Nigerian Opposition Party Politician and Governor of Ekiti State, (SW, Nigeria)


Do you clear your credit card balance every month? If you do, and you don’t have any other outstanding loans/debts then well done! You’re not wasting money paying interest and you’re already in a strong position to go forward. Skip the rest of this Rule and carry on.

If you do have a credit card balance (or five), an overdraft and/or other loans or debts!”, then you certainly aren’t alone. It’s so easy to get credit these days, and we live in a ‘have it now, pay later’ society. Trouble is, debt bogs us down and holds us back. We’re simply throwing money away paying off the interest (you borrow, say, £20,000 and can end up paying several thousand pounds extra back in interest - the actual amount you end up paying depends on how long you borrow for, as well as the interest rate you’re being charged). Debt is a millstone round the neck - it makes you feel bad, it’s always there nagging away at the back of your mind and it can easily become a major problem that affects your health as well as your wealth. 

“Debt is a millstone round the neck - it makes you feel bad, it’s always there nagging away at the back of your mind and it can easily become a major problem that affects your health as well as your wealth”.

There’s no doubt about it. The very first thing you need to do on your wealth quest is to get loans/debts paid off as soon as possible and do nothing else until that’s done. There’s no point at all starting to put money into a savings account, earning say 5 per cent interest, if you are at the same time paying 10 per cent interest on money you owe to the bank or somebody else. It doesn’t make any sense. The simple truth is that those who borrow almost always pay a higher rate of interest than the rate received by those who save.
I acknowledge that you may in fact have found a special situation where you can borrow money at a very low rate of interest and believe you can invest that money for a bigger return, but I say be very, very, very careful indeed. You are playing with fire here and unless the investment is absolutely risk free (which I doubt), pay the debt/loan off as fast as you possibly can.
I should stress here that there are a few possible special exemptions to this Rule; for example, if you’ve borrowed to invest in, say, a business and you really know what you’re doing. We’re really talking mainly about personal debt in this Rule.
I’m not playing down how difficult it is to become debt free, but it has to be done. Make a plan as to how you’re going to get rid of your debt. Start by paying off the highest interest debt first if you’ve more than one. Motivation is vital as this is short-term pain for long-term gain. And of course once you finally make it to debt free, you’re never going there again, are you? (See Rule 36 on www.asabeafrika.blogspot.com.) Of course you aren’t. You’re a Rules Player now.

From The Book; The Rules of Wealth by Richard Templar
(Read Rule 41 of Rule of Wealth tomorrow on Asabeafrika)

Read-to-Wealth Series

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