The key to avoiding debt may lie in developing your self-esteem, says Dr John Demartini.
Common wisdom tells us that to avoid falling prey to debt, you have to re-examine your spending patterns.
But first, a key piece of debt advice is to re-examine your priorities.
“If you don’t have a high value on wealth building you will probably not achieve the goal of wealth building,” he explains.
Put another way, if saving and then investing isn’t a priority, you won’t be intrinsically driven to put away money every month.
Instead, you’ll spend on those things you value more, whether that’s your home, your children, entertainment or health, making it harder to avoid debt.
While many of these are laudable – no one is saying that you can’t aspire to optimal health.
The reality is that placing too much value on these objectives can leave you vulnerable to salespeople’s gimmicks.
And that’s where the catch lies.
“There’s nothing unwise with spending money on items that appreciate in value. Even getting into debt if the item you borrow money for and buy produces or appreciates in value more than the cost of the debt – but there’s a big proviso here, which is that your debt it to be only used for that which provides you a return on investment.”
The trap of Credit Cards
By all means, use a credit card if you are able to pay it in full every month, and can therefore access all the perks offered to cardholders.
In this case, your credit card becomes like an asset.
But for every person who is using their card in this manner, Demartini warns, there are others who are carrying 10% of their annual income in credit card debt.
The key to making sure you don’t fall into this second camp: Educate yourself.
Find out what costs you’re in for, and what benefits you’re entitled to, when you sign up for any bank products.
Next: examine what you’re spending money on
Although it’s tempting to keep up with the Joneses, it’s more important to buy items that have lasting and appreciating value.
To avoid becoming impulsive and seeking immediate gratification, avoiding debt means asking yourself whether you would be willing to forfeit your financial independence for it.
“Every time you raise your lifestyle, without raising your savings and then investments to the same degree you’re making it less likely that you’ll achieve financial independence,” says Demartini.
Saving is critical
Demartini maintains that “money goes where money flows”.
It usually flows towards those who already have an adequate reserve of it.
That’s no coincidence: such people have set their course by saving a significant portion of their income (starting at 10% if you are in your twenties) and living simple lives that aren’t built on luxuries.
Those of us who can’t resist those luxuries would do well to take a look at why we crave them.
Often, it comes down to craving the dopamine boost that comes when you make an indulgent purchase.
This self-fulfilment is key to avoiding debt.
“If you don’t develop your own brand, You will become a consumer other people’s brands to make yourself feel better.”
Six steps to developing financial freedom:
- Create a business that serves ever greater numbers of people. Wealthy people have a work ethic; they uncover people’s needs and find a way to serve them.
- Find ways to manage your business to make it more profitable.
- Save an ever greater portion of those profits.
- Invest in an ever greater degree of leverage.
- Acknowledge the benefits of building a fortune, so that you don’t squander your money on trivialities and avoid debt.
- Create a financial cause that leaves a legacy.
If you would love to become and then remain debt free consider developing the following 10 habits.
They will help you live a more inspired life within your means and help you expand your means gradually so as to live a richer and even more fulfilling life.
- Monitor your personal finances, pay attention to details, budget and make sure you do not waste your money.
- Research, learn and govern your finances – know what your essential costs are.
- Pretend you make less and live within your means so you can increase your savings.
- Think wisely and long-term more than foolishly and impulsively for immediate gratification.
- Be willing to ask for more reasonable deals or interest rates – ask and you shall receive.
- Habitually and electronically save ever greater portions of your income.
- Set specific long-term or immortal goals worth saving and investing for.
- Say no to spending temptations and non-priority expenses that can enslave you.
- Value using cash to keep yourself aware of your actual expenses.
- Value experiences and appreciable investments more than just accumulating transient consumables and depreciables.
Start each week with a boost of inspiration from Dr John Demartini. To receive your Monday inspired quote click HERE.