Hey welcome back friends. In today's
video, I want to share with you how you
can trade bad debt and trade it for good
debt. Alright my friends. So, today we're
talking about how to trade bad debt for
good debt. And some of your like, "I
actually didn't know that debt could be
good." Let me just walk you through it
real quick. And then we're going to talk
about how you trade the bad stuff for
the good stuff. First of all, understand
that in this English language we have
one word, debt. But it can be something
positive or negative. It can be something
good or bad. And what really determines
whether it's good or bad comes down to
whether the debt makes you money or cost
you money. So, for example, we all know
that if I buy something with a credit
card, some type of consumer something,
that I'm going to lose money. if I buy a car,
my car doesn't appreciate value. It only
goes down and value. There's a number of
debts that are out there that we can buy.
And we get maybe the benefit for a
certain period of time but we have to
pay for the debt until it's all wiped
out. On the other hand, there are very
very good debts. A good debt is something
that makes you money. A good example of
that would actually be real estate
investing. A lot of what this channel is
about. This would be I bought a home and
I rent it out to somebody. And yes, it's a
debt. I have to pay the bank $1000
every month. But the people in
the home pay me $1,400 every month. So,
there's like there's $400 left over. That
positive arbitrage. Well, that $400 every
month and then the fact that the house
appreciates in value or you maybe bought
it with equity. It's an asset. These are
liabilities, these are assets. These cost
you money, these make you money. So, if
you're watching this video, we're talking
about how do you trade this stuff for
that stuff. And for me, to really share
this with you, you need to understand
something. You're going to have to take one
step backwards if you want to take 2
steps forward. I want to give you a very
real examples from my life of what I
mean by that?
My wife and I, we got we got in a bad
place financially. I was working
full-time, going to school full-time.
And my wife was trying so hard to keep
us out of debt. And so, every penny that I
made was going towards school and
tuition and food. But we got to the point
in our very very early marriage that
even working full-time,
I could not stay at a debt. And we were
about to sign for some student loans. And
my wife didn't want to. So, we chose
normal credit cards. I remember we had
like a Juniper Sinclair credit card. And
we had one other credit card. And we
started going into debt. And I remember
when we had our credit card debt hit
$8,600. This
made my wife really nervous because 1,
we didn't have $8,600
in the bank to just wipe
out the debt. And every month, the debt
was actually increasing. But not only was
it getting bigger but we had to make a
monthly payment. And it was a struggle
for us to make the payment. So, debt
started spiraling out of control for us.
And it got heavier and heavier and
harder to to get. When I bought my very
first home at the time that I had this
debt. I also had an asset. And I remember
that because I had the house that was
valued at a $150,000
and I purchased it for $110,000
that there was about a forty
thousand dollar difference there. Now,
that's $40,000 on paper.
What does that mean to me? After 12
months of owning the house, I went into
the bank. It was a Wells Fargo. And I said,
"Wells Fargo, this is what it's worth, this
is what I owe." And you know what they
said? "Hey, we'll give you a home equity
line of credit for $18,600."
A home equity line of
credit. That basically says, "You could put
up to $18,600
on this line of credit. And we're
just going to tack it on your mortgage
because you have that much equity." So,
here I've got an asset. And it was
tempting.
I'll call and my wife I said, "We could
take this money, we could pay off the
credit card. And then we would be out of
debt." In actuality, we would just be
transferring this debt to this debt. And
we'd be wrapping it at a lower interest
rate. And I'll be honest, it felt
appealing at times. But that is not what
we did. Instead what we did is we took
another step backwards, so that we could
take 2 steps forward. What we ended up
doing was taking this home equity line
of credit. And instead of paying off the
debt, we ended up putting this into an
investment property. Now, by the way. This
was an investment property that had a
value of $250,000
and I was purchasing it for
$150,000. A hundred
thousand dollar new
asset of equity. But more importantly,
this house every month kicked off a
positive cash flow of $600
a month. What that meant was our
mortgage was about a thousand dollars a
month. But our people in the home were
paying $1600 a month. So, there
was $600 left over after
the mortgage was paid every single month.
What my wife and I decided to do was
take the $600 and we
started doing what? We started applying
it to the credit card debt. And in a
matter of time,
we actually wiped out our consumer debt
with an asset. You know, you're going to get
to a point in life when you're going to
have perhaps debts and assets. And at
some point, you're going to say, you know,
"Let's just clear the deck." Like let me
just make it really broad. Let me make
really broad strokes here. Let's just say
that you've been working now for 10, 15
years. And let's say that you have
$50,000 of debt. And let's say that you
have $50,000 of assets. And there's going
to be a temptation. It's taken us 10 to
15 years to get here. We got this bad
debt and we have this asset. Let's just
eliminate the asset and eliminate the
debt. And let's wipe the slate clean. If
you do that, you're starting from nothing.
Now, hopefully you learned your lesson
and you won't do consumer debt. However,
there is a faster way. Instead, take this
$50,000 a bad debt. And take this $50,000
asset. By the way, what I'm about to share
with you, there's a number of people that
highly disagree with me. But this
offensive play has worked out over and
over and time and time again for me. And
it's my nature. So, I'm I just understand
I'm sharing something here that not
everyone's going to agree with and it's
very polarizing. If I work so hard for
this asset and also this debt, I'm going
to take this $50,000 and I'm going to
invest it. And if I put in something like
real estate that in a period of time, I
can double, let's just say rule of 72,
let's say I'm getting a 15% R-O-I on my
investment property. Rule of 72 says that,
If you divide 72 by any compounding
interest rate, it'll tell you how long it
takes to double. Plot your calculator. 72
divided by a 15% R-O-I means that I'll
double my money in 4.8 years. Let's just
say in 5 years. Well, in 5 years, my
50,000 has now turned into what?
$100,000.
So, now you're thinking, "Kris, now I can
take my hundred grand. I could pay off of
the bad debt and have 50 grand left over
to keep investing." You could. But now
you're going to get into another
interesting choice. Do you take this
hundred grand? Let's just say,
theoretically you invest in at 15%.
In five years later it was now
$200,000.
Well, now you can wipe out your bad debt
four times. And you're like, "Now, for sure
I should do it. But five years later,
200,000 might be what?
400,000. And five years later it
could be what? $1,000,000. So, now
all the sudden. The question isn't "Should
I pay off my debt?" It's "When should you
pay it off?" The mistake that I see people
make on a regular basis, is they'll take
the little if they got. They'll eliminate
the bad and then they'll start over. But
the reality is the things that you did
to create this, you can re leverage and
keep growing yourself and when do I
eliminate my bad debt? When I have so
much good debt. So many assets that I can
do it without hurting my ability to
invest. Without hurting my ability to
grow. Now, I will tell you that this is
very unique to my financial approach to
life. And there is a balance in all
things. But I will never, mark my words, I
will never wipe out my ability to grow
because of a debt. That's called scarcity.
That's called living in fear. This
approach is an approach of abundance. And
ultimately man, I got to tell you. This
stuff can kick your butt. Scarcity versus
prosperity and abundance. Which is also
why I teach on a regular basis. My
life-changing-three-day course. Which is
all about how do you stay in an abundant
space, so that you don't allow the very
real things that it can hurt you to take
you down. Because here, in my opinion, if I
wipe out the good to wipe out the bad
and I'm left with nothing, I lost. I
didn't win. I actually set myself back. So,
the approach that I'm sharing with you
is all about how you can trade bad debt
for good debt. How do you do it? You
double down, you get more good debt and
use your good debt to eliminate your bad
debt. That's the best summary that I can
give you. Use good debt to eliminate your
bad debt. And that's why I love real
estate investing. And if you want to
learn how to invest with me, have me
as your mentor and actually help you
learn how to do this, then all you got to
do is subscribe to the channel and then
click the link in the description below.
Where you
reach out to my team. We'll contact you
and share with you a specific game plan.
That no matter where you live or where
you're at financially, we can show you
how to get yourself in a position where
you build your assets and you eliminate
your debts.