Dec 4, 2017
In this episode of the High
Return Real Estate Show, Jack and Shecky talk about whether or not
you should pay off debt before getting into investing. They break
down what good and bad debt is...
Key Lessons Learned:
Good Debt vs Bad Debt
- Not all
debt is equal, there is good debt and bad debt. The line can
sometimes get blurry but a good rule of thumb is good debt makes
you more money, and bad debt costs you.
debt is debt that allows you to generate a return that you wouldn’t
be able to create otherwise or opens up opportunities that you
wouldn’t be able to access. If borrowing money allows you to make
even more money, for example a business or education, it’s probably
good debt to take on.
- When it
comes to buying a house for you or your family, going into too much
debt is all too common. You have to be careful about how much house
you are buying, how leveraged you are, and what position you are
- Look at
the rental market of your local area before buying a home, it can
make more sense to rent than buy in certain markets.
home is the greatest and biggest and smartest investment you’re
going to make” is something realtors say to try to get you to buy a
house. The best investments are the ones that make you more money.
Home equity is not the same as money in the bank.
into debt to learn a new skill is not always the right choice, it
depends on how marketable the skill is.
something that you can’t really afford on credit card debt isn’t
always a bad choice, it depends on the total cost once you pay off
the debt and the thing being purchased. Is there any other way you
can buy that thing that doesn’t require you to use credit? Are
there other alternatives?
think about what you are spending your money on. It’s easy to spend
a lot of money on things like food and coffee that add up over
time, especially if you add in interest.
- We tie
a lot of our self image to the kind of car we drive.
dealerships are masters at appealing to our sense of getting a good
automobile depreciates extremely quickly. In terms of an
investment, a vehicle is a poor choice.
costs are insignificant compared to the amount of depreciation the
vehicle is exposed to.
- Technology in cars is accelerating, cars being
produced today are depreciating even faster as they are becoming
- Find a
used car and drive it until the wheels fall off. The money you save
can be invested.
Making Better Decisions
have to have very clear vision and goals and know where you’re
people won’t have the discipline to build their future.
like boats and snowmobiles can be a good choice for some people who
will really get a lot of use and enjoyment out of it, but it’s much
more likely to be bad debt and the wrong place to spend your
have to live within your means.
ultimate answer to whether you should pay off debt before investing
is: it depends. Look at your risk tolerance and the spread of the
opportunity you are considering. What are you investing that money
into and what can you be using it to pay off instead? It’s hard to
find an investment that can outpace the interest rate on credit
- If you
want to pay off debt right now, consider getting a second job.
There are only two ways to increase your income, make more money or
reduce your expenses.
The Millionaire Next
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