FP Article 27 (To sign up for a FREE 6-lesson eCourse on Defeating Credit Card Debt, please click here.)

Moving From Debt to Riches

by Rajen Devadason

If so, I'd like you to read this article with an open mind and a ready pen by your side.

I promise you this article will be relatively brief. That is intentional. My aim is to help you quickly learn 8 core principles that you can start putting into practice... today.

I know what it is like to be so overwhelmed by your debts that more often than not you can't sleep soundly. This state of mental disturbance can result in dramatically reduced daytime mental acuity, which yields even worse financial decisions during your vertical hours.

Right now, I'm going to cut through the mess and deal with the heart of this matter:

Those who find themselves in a state of excessive debt got there by traveling the exact same road that's been traversed by Deep Debtors since time immemorial. That wide and smooth path is paved by daily decisions to spend more than is earned.

PRINCIPLE 1: You can't get in debt if you don't spend more than you earn.

Conversely, those who grow richer over time choose to traverse a narrower, rougher street that's tarred with daily, perhaps hourly, decisions to spend less than is earned.

PRINCIPLE 2: You can't help but grow rich if you always focus on earning more than you spend.

Anyone who takes the time to figure out the average cost of his or her loans, in annual interest rate terms, and then compares that to the average yield on his or her savings and investment vehicles will quickly realise that our debts usually cost us more than our savings and investments yield us. Yes, in that regard, the deck is stacked against us! Thankfully, WISDOM will find a way to prevail...

PRINCIPLE 3: Start paying attention to interest rates charged and earned.

Those who decide that enough is enough, who are fed up with constantly burning up hard earned money at the altar of consumer debt, should begin thinking and researching repayment options and strategies that will help them accelerate their repayments even as they simultaneously work hard to bring their expenses under control. It is vital to understand that everything that's linked to moving from a state of (seemingly) perpetual debt to one of eventual abiding riches boils down to exercising self-discipline in day-to-day spending decisions. It also doesn't hurt to focus on increasing your mental store of knowledge and experience in your career specialty; doing so will permit you to earn more money in the years ahead.

PRINCIPLE 4: Decide which is more important to you: Having some shiny new toy today or growing super rich tomorrow.

As wise people make the decision to declare war on their debts, they always figure out ways to spend less. This aim is usually achieved by establishing a spending plan or a budget.

PRINCIPLE 5: Pay attention to your cash flow statement - comprising cash inflows and cash outflows.

The month that you are able to earn more than you spend, is the month that you will end up being cash flow positive! Once you get to that stage, it is a mathematical certainty that you will begin growing richer. This truth can and should be verified by regularly updating a net worth statement - comprising assets and liabilities.

PRINCIPLE 6: Construct and update your net worth statement.

As you get in the habit of monitoring your cash flow patterns and your net worth changes, you will figure out how to squeeze ever more cash out of your budget to fashion into a killer bullet aimed at the heart of your debts. Each month you are able to bring your total debt position down, the more you will have the following month to do the same thing again... only better!

PRINCIPLE 7: As the principal sum on debts is reduced, the interest charged on the loan drops. This frees up even more cash the following month to step up the battle against debt.

Eventually, all your debts will be eradicated. This will free up a great deal of monthly cash flow to aggressively flow into savings and investments.

PRINCIPLE 8: Don't wait to get out of debt before saving and investing something each month; but note that you should become much more aggressive on this exciting Riches Accumulation front as your debts are beaten into a smaller and smaller pulp!

Don't let the simple wording of these 8 principles fool you. Reread them, take careful notes, carry out appropriate research, decide upon clear steps you will take and watch yourself begin your personal trek from debt to riches!

© Rajen Devadason