Last episode, I spoke with two of my very good friends, both business owners whose respective businesses have a focus on mindset. Since every great journey truly does start with mindset and self discovery, I thought it would be a great place to start. Like most of us, Lexi and Ed had their own struggles with finances at some point or another, and they both had varying mindsets as well as strategies when it comes to debt.

I find it completely fascinating that people can be so paralleled when it comes to such a key part of their being while being so divergent in others. Differences are what make us so amazing and unique though, right? The great news is that no one is right and the other wrong. It simply comes down to what is right for that individual.

In the previous episode, Lexi told us about what she remembers of her experience relating to money and debt at a young age and how that impacts her even to this day. Learning from her experiences, she now abides by the idea of stop, challenge, choose almost in a Marie Kando philosophy, do I really need this? Does this bring me joy? Support my goals, fill my soul kind of way. Knowing that there’s a distinction between good debt and bad debt, she understands the importance of managing it all
appropriately.

Her bottom line. She’s okay with some debt, knowing that credit is required in certain job roles and some other major life events, that to a certain degree, it’s needed to provide yourself with opportunities that weren’t there before you before for you financially. She simply wants debt to help her build something without feeling like it’s weighing her down.

She believes fully that finances, health and mindset are all tied together. Acknowledging that financial stress and traumas can consume someone and allowing it to fester in your body will inevitably enable it to trickle into everything else in your life. So she vowed to be conscious in her attitude about money and debt to avoid that happening in her life.

Moving forward, Ed’s story starting off in much the same way ending has one distinct difference. After recovering from financial hardship, billing his credit, reading some finance books, he is still highly adverse to debt, citing mainly in the Dave Ramsey camp of Live debt Free. But within the last couple years, he has begun to shift that mindset to explore what opportunities he has to leverage debt.

Now, understanding how to navigate the balance first limit waters, he’s opening himself up to seek alternatives to investment strategies and in tandem, gathering that debt may open doors he didn’t know existed. Not yet quite dipping his toes in that pool. Yet though, the conundrum of to leverage debt or not to leverage debt and guidance in making that Decision is our main topic for today’s episode here on Invest in you.

My name is Dena Glasgow. I want the discussion of money, financial literacy, and the creation of generational wealth to be less taboo. My hope is to help people break down the barrier walls they use as a defense mechanism when asked to talk about their finances.

For people to understand that they don’t need millions or even thousands to begin making their way to financial freedom, as well as offer insight and opportunities that are out there to take action to find their version of success and path to wealth. Because there’s not one way to success. We simply have to find your way to success.

They say it takes a village to raise a child. Why go solo with your finances? When we last left off, we were discussing some key points in building credit, and that is where the conversation needs to begin. When contemplating leveraging debt at all, you have to be credit worthy.

Making yourself an obvious choice to creditors and lending institutions springboards you to having options. Therefore, we need to learn to play the game. Yes, I said play the game.

I’m sure there will be somebody out there to say, shame on you for making light of a topic that that can have serious ramifications on someone’s future. And to that I say, slow your roll. Sally.

It’s not that I’m making a joke of it. I call it a game because that is what the bureaus do with us as consumers. It’s almost like going to a casino.

You’ve heard it before, the house always wins. It can often feel like that when you’re looking to build credit. To start, none of the bureaus even look at things exactly the same, so their scores very rarely match exactly.

So how are we to know the rules if we aren’t playing the exact same game? They really do set us up for failure in several ways. With no real education provided as a consumer with their first taste of credit, you’re supposed to simply know exactly what to do, no guidance on how to best manage it. They penalize you by dropping your score when you open debt, also called a trade line.

And then they also drop your score when you close a debt, even if it’s an installment loan, like a car loan that you paid religiously on time and finally paid off. Boom. Your score will drop.

It may only be slightly, but it’s still a drop when you were celebrating for eliminating a liability. Alas, now only time and further on time payments will help bounce that score back. The sad news is if you don’t go out there and find those answers on how to play their game for yourself.

No doubt you will make some errors along the way, ultimately costing you lots of money and even worse, a lot of time. Time and money have a very strong relationship to each other. That concept is its own episode altogether.

But when you make mistakes with your credit, you can end up paying for it for years. So let’s do a quick crash course to help you avoid some very costly mistakes. Mind you, I provide you the disclaimer I’m not a credit counselor and everyone’s situation is different.

But truly, even if you went to the bureaus directly and pose some questions to them, there is limited info they will provide to you as to why your credit score is what it is, only providing generic categories of criteria of why it may be that way, unable to source specifics to you as an individual. Plus, what most people don’t understand is that you could pull credit for a credit card, an auto loan and a mortgage loan at the very same minute. They would all show different scores.

Because what we see when we use services provided by our credit card companies or standalone services like Credit Karma, even if you use one of the credit bureau’s services themselves, they’re all showing you what’s called your consumer credit score and are not an exact reflection of what the creditors will see when they pull your report. As each one of those types of credit weigh factors differently. So without spending an entire episode on the topic, here are three main factors to be mindful of
when building your credit Always make on time payments and on revolving debt Always make more than the minimum payment.

Making one 30 day late payment can have a long lasting effect on on pulling your credit down. And if you’re only making the minimum payment on revolving debt, it will take you years to pay off and you will be throwing away an astronomical amount of money. Number two, your balance to limit ratio is crucial to see your score rise.

The bureaus want to see you use the credit they’ve provided, but they don’t want to see you maxing it out every chance you get. Nor do they want it to just sit there unused as that’s not making them any money at all. So they incentivize you using the money.

If done responsibly, they reward you with occasionally increasing your limits and increasing your credit scores. Fight the urge to let your credit card balance go over 30% of the limit you’ve been provided, otherwise it may start to have a negative impact. Hi there, this is Josh Naiman, CEO and Founder of Naiman Creative.

We’re the ones who produce the podcast that you’re listening to right now. Well, on top of podcast production, we do anything related to websites from design, development, maintenance, management and even hosting. And today I want to talk to you about maintaining a website properly in comparison to maintaining a car.

In order for a car to run smooth and last long, you have to frequently change the oil, top off fluids, get tune ups, keep it clean, make sure the tires are always inflated and replaced when they expire. The same goes for a website. You’ve got to stay on top of maintenance and updates to strengthen security, improve speed performance and keep the content current and relevant.

Google likes this too. Well here at Name Creative, we’re here to help. Reach out to us@infonaymancreative.com and we’ll get you taken care of right away.

Ideally is leaving your balance at 10% or less of the limit. That’s when you may start to really feel the benefits. You don’t have to do that with every card you have, better to have the majority paid off, circulating between only a couple or a few to leave a small balance.

Number three, the one that most people don’t acknowledge is the time you have in debt. In creditors minds, the longer you have had that debt open, the more stable and consistent you are with your finances, generally over five years in an open trade line being ideal. I mentioned this previously, but this concept is often the factor that’s overlooked, especially when taking inventory if it’s a good time to be opening new debt or closing out old debt for someone.

If you only have one credit card and you’ve had it for 10 years, your credit life is 10 years. Let’s say you’re thinking, you know what, my score is looking good. The interest rate on this card is pretty high and they won’t seem to increase my limit to what I think it should be.

So you go out and you open a new card. Now carrying those two cards, your credit life dropped to five years. If a year later after opening that second card, you then open a third card.

Now your credit life is a little over three and a half years. Now you’re thinking man. Card two and card three are way better than card one.

They both have higher limits, they have lower interest rates, and both provide me with some kind of rewards. I’m closing out card one. Now you’ve just dropped your credit life from three and a half years down to six months.

And the next time you look at your credit score, you’re cussing at the universe because your credit score took a significant hit. Staying mindful of These three factors payment history, balance to limit, and your average credit life will help you develop develop a strong credit outlook when what’s Next Learning how to Leverage Debt if you haven’t picked up on my outlook on the topic of to leverage debt or not to leverage debt, I’m in the camp of using OPM other people’s money. Historically, that
is how many of the most wealthy have gained that status by leveraging debt other people’s money.

But there is more things to grasp before diving in headfirst. Now you’ve developed a sound credit report, you must understand the concepts of good debt versus bad debt. The easiest, most basic way to look at this concept is thinking of good debt being the type of debt that allows you to acquire assets that will increase over time or low interest rate debt that will be funding your future or your health, also leading to you being able to make more money in the long run.

Bad debt is buying stuff you don’t really need with money that you don’t have, or buying things that lose value quickly. Those items may provide instant gratification but may end up costing you more, dragging you down, delaying you from reaching your goals. When you are assessing what to pay off or down first, take a deeper dive at what you have.

Open the type of debt, the balance, the interest rates, the payment requirements, what both your short and long term goals are, and most of all, understand what your own risk tolerance is for debt. My example, let’s say. Well, an example really.

Let’s say Gloria has a mortgage payment at 2,500 bucks and her car payment of $503 credit cards totaling $6,000. Does Gloria pay off or down first? That information alone isn’t enough to help Gloria decide. We don’t know what her focus is.

Maybe she always spends on her credit cards to earn reward points and two of them has zero interest rate for the next 12 months. She Budgets enough every month to pay the balances down by half of what they are. She keeps her balance to limit ratios down and she enjoys continuing to build those points and her credit lines.

Her mortgage is a 15 year mortgage and a 3.5% interest rate which she’s had for four years now. She has a substantial amount of equity and is comfortable riding out that mortgage until it’s paid off without needing to put anything additional to her payment.

But the car payment for Gloria is a point of contention. Her last car’s motor seized up after having it eight years and being paid off for the most recent three years of owning it. She didn’t see the point of paying to get a new engine, so she figured why not get a new one? She’d been eyeing up the new sedan on her local car lot anyway, but rates are higher now and a used car, even for someone with good credit, started at 8%.

She wanted that thing paid off as soon as possible, appalled at having a 500amonth car payment and angry at the rate. Then there’s Reggie with the same scenario. House payment at 2,500, car payment at 500, and three credit cards totaling $6,000.

Reggie’s always had a car payment and that $500 is normal for the cars that he likes. The credit cards he’s managing, he has a game plan to pay those off over the next eight months. But he is so stressed with having a $2,500 house payment and his goal in life has always been to own his house free and clear.

So once those cards have been paid, he plans on cutting the cards up to not be tempted to use them and dumping all that money directly to the mortgage to pay it off in half the time. Gloria and Reggie had similar situations, but much like Lexi and Ed, they had varied tolerance for risk and and varied short term and long term goals. So many people remain simultaneously Debt adverse and envious of the wealthy.

Real change in your finances only begins when you take the steps to learn and change your strategy. Once you’re savvy with managing your own debts, the next phase to implement is pursuing investment debt. The term investment debt refers to borrowing money to acquire acquire assets with the potential to produce revenue appreciation and or provide tax advantages for the borrower.

Common examples of investment debt include real estate financing. Investors leverage mortgages or construction loans to purchase investment properties like apartment buildings, retail centers, self storage units, etc. Anything that’ll produce ongoing rental income and asset appreciation.

You have business loans, equity financing, equipment leasing, commercial loans to fund expansion, acquisition or operations of a business, securities backed loans borrowing against stocks or bonds to generate cash for additional investments while delaying capital gains taxes Tax strategies strategically deducting interest expenses while accumulating assets that often outpace the borrowing costs. The most relatable scenario to demonstrate this concept is Gloria. Seen from earlier, she is an
individual owning a home with a significant amount of debt.

Gloria takes out a home equity line of credit which allows her to tap into the equity of that home to acquire a cash flowing business. Her home equity line of credit now has a balance of 250,000 and she has a rate of 10%. While this may sound high to some, Gloria knows that she took on good debt because the business cash flows over 250,000 per year.

That is money available after all the business expenses and the debt service is covered, offering her a return on her money that well exceeds the debt she incurred. Now Gloria has the opportunity to decide to take the profits or pay off the debt, use that money to invest back in the business to help generate more cash flow or to buy another business. Maybe she does a combination of things, but the real win is that she has options and has made a huge leap in creating generational wealth.

Investment debt is distinct from other liabilities because the debt itself is used explicitly for purchasing income producing assets rather than simple consumer purchases that provide no financial gain. While most personal assets depreciate, investment assets appreciate the key to developing a strategy that allows you to tap into debt to acquire assets that will then pay for that debt while earning you a higher rate of return starts with being able to analyze the deal opportunities before
releasing capital, keeping focus on maintaining reasonable loan to value ratios, ensuring the debt service costs don’t exceed cash flows from the assets so that you can make payments comfortably and adhering to these disciplines helps mitigate the downside while allowing upside potential. As long as assets reliably cover debt payments, accumulating assets via strategic leverage is a true game changer.

I hope this episode gave you a lot to think about. At the very least, I hope it prompted you to do some reevaluating of your current situation. If everything we covered today was old news for you, that’s okay, because I know there are some listeners out there that may have just had their minds blown and are getting excited for what’s to come.

As they should because we’re only getting started. Thanks for joining us today. Be sure to like, follow and subscribe.

You’re not going to want to miss out on what’s in store for next time on Invest in you. Sa.