Secret to Building Wealth

One of the very first steps in building wealth is having the right mindset. Look, I’m not talking being rich, I’m talking about being wealthy. There is a difference. In fact, there is a big difference.

I’m sure you have heard of rich celebrities who have gone poor because of their poor money management, or their bad spending habits. Being rich means having tons of money… at least for the moment. Being wealthy means having tons of money… FOREVER, possibly for generations and generations.

It doesn’t matter what your income level is, or how much money you have in your bank, if you continue to mismanage your money, you will go bankrupt.

One of the fastest ways to bankruptcy is living beyond your means

If you bring home $1,000 per month, and you spend $1,500 per month, you will go bankrupt. It’s simple. It’s undeniable. It’s math. However, most people fail to see this.

WHY?

It’s credit! Those damn credit cards I tell you! It’s like what Mama says in the Adam Sandler movie “The Waterboy”

Those bankers are the devil… They created ’em credit cards!

WHY?

Credit gives you perceived money you don’t have. It stretches your buying power. It gives you a temporary illusion that you have the cash to pay for whatever purchase you are about to charge on your card.

If you are like most consumers, you probably have multiple credit cards, and carry a balance from one month to the next. If you are like most consumers, you probably have a car payment. If you are like most consumers, you probably have student loans. If you are like most consumers, you probably have a mortgage.

The first step in building wealth is to become debt free

I used to believe what financial gurus would tell you… that not all debts are created equal, that there are GOOD debts, and then there are BAD debts. Credit card debts, auto loans are all bad debts. An example of a good debt would be a mortgage or student loan.

I’m here to tell you…

All debts are BAD – they create unnecessary financial and emotional stress in your life. GET RID OF THEM!

The best return on your money is paying off your debts, and start paying everything with money you have in your bank, not with your credit line on your card.

Years ago my wife and I were in the worst shape of our lives, financially. We had 6 investment properties, a vacation cabin in Big Bear, CA, and our own condo in Long Beach. We were in our 30’s. We thought we could own the world.

Then, 2008 happened. The financial crisis took down the real estate market. Our investment properties went to the toilet. A couple of properties went vacant and we took a big hit in monthly cashflow. We were young and stupid and kept out debts afloat by pulling out cash advances from our credit cards, all $200k of it.

Then, as if it’s by destiny, on my way to work the Dave Ramsey show started airing on the news station I usually listen to. I remembered his catchy slogan as the show began with a “Debt is dumb and cash is king” phrase.

Every Friday he would have these people who have followed his advice on becoming debt free to call into his show and do the “We’re Debt Free” scream.

I don’t know what it is, but every time a couple or a family called in to do their debt free screen it gave me a really really good feeling, as if we are also debt free, but only minutes later to return to reality that we have about a million dollars worth of debt handing on top of our heads.

I kept listening to the Dave Ramsey show. I kept listening, and listening… and finally I LISTENED. I told my wife, “Hey honey, you know this Dave Ramsey guy I’ve been telling you about, well, I think we need to do this.”

It was absolutely the best financial decisions we could make.