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Wealth Building, Rule #1

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Wealthy II


“Only borrow money to pay for things that increase in value” – Seth

People often say “Debt is bad.” It’s not quite this clear cut. Bad debt is very bad; Good debt can be very good.

Bad Debt = borrowing to buy a depreciating asset or experience (shoes, boat, car, most vacations)

Good Debt = borrowing to buy things which increase in value (real estate, businesses, collectables) or increase your value (targeted education and training, for example).

Pay off your bad debt ASAP. Take on Good Debt, in small doses, after loads of education.

Got it ?

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23 Comments

23 Comments

  1. BawldGuy Talking

    June 9, 2008 at 11:06 am

    Benjamin — You nail head hitter, you. 🙂

    After hearing the occasional prospect hold forth in my office as to why free and clear is the only sane way to arrive at retirement, I first make a declaration, then ask them a question ending in a choice.

    Debt, in and of itself is not evil any more than water, which can cause death, is evil.

    John retires with a free and clear home and a couple debt free duplexes. His income is, net of operating expenses for the duplexes, around $30,000 annually.

    Mary retires with a home sporting a $1,500/mo. mortgage, and seven figures in investment property debt. Her retirement income is well over $150,000 annually — most of it tax sheltered or tax free.

    Which person’s retirement would you rather have?

    It’s sometimes at this point where never before experienced speech impediments kick in.

  2. Christopher Zabka

    June 9, 2008 at 1:19 pm

    This is a great distinction, Benjamin. Thanks for making it.

  3. Benjamin Bach

    June 9, 2008 at 1:41 pm

    Thanks Jeff!
    Its amazing how many people have that conveniently timed stutter, eh ?

  4. Jennifer in Louisville

    June 9, 2008 at 1:57 pm

    Excellent advice that most persons simply just do not understand. They get told by the media and self-proclaimed “experts” that they should cut up their credit cards, and get rid of all their debt so they can be financially sound. When in reality, most persons that are considered wealthy (other than by lottery winnings, or inheritance) – had to go into debt at some point to get their product/business off the ground.

  5. BawldGuy Talking

    June 9, 2008 at 2:25 pm

    Yeah, the cat they haven’t quite skinned is the one who got that tongue, too. 🙂

  6. Susan Hilton - Texas Aggie Realtor

    June 9, 2008 at 6:58 pm

    Buy low and sell high!

  7. Susan

    June 9, 2008 at 10:13 pm

    Got it Benjamin, and so true. Good job spelling it out so simply.

  8. Nickie Rothwell

    June 9, 2008 at 11:52 pm

    Words of wisdom…

  9. Bill Lublin

    June 10, 2008 at 3:46 am

    credit Cards=Bad
    mortgages=good
    Especially in Canadian $$ these days 😉
    Nice Job Benjamin!

  10. Benjamin Bach

    June 10, 2008 at 6:23 am

    Thanks Christopher

    Jennifer in Louisville, thanks for sharing that perspective. I agree with you, and shared your quote on my blog @ BenjaminBach.com. Check it out!

    Good advice Susan H!

    Thanks Susan – sometimes we need to be reminded what we already know, and what we should know.

    Nickie, welcome to AG !

    Bill, thanks for the coles notes. Do you have any Loonies to spend ? Lots of buying power !

  11. Jennifer in Louisville

    June 10, 2008 at 1:28 pm

    Thanks for the kind words, Benjamin! 🙂

  12. Braxton Haines

    June 11, 2008 at 12:56 am

    Great advice, now give us some examples of good debt investments, how to find them, how to get involved, etc.

    Basically, I need a blueprint to become a millionaire with little to no effort. 😉

  13. Susan

    June 11, 2008 at 1:19 pm

    “Good Debt” is somewhat of an oxymoron, don’t you think?

  14. Brian Pearson

    June 11, 2008 at 3:53 pm

    So many people gloss over when you try to explain that debt can be good. People think they have to pay down the mortgage asap and put all their money into it …

    Try this .. If you put 20,000 down on an investment property worth 100,000 and the house goes up by just 5% a year, that’s 25% on your original investment! Even if you rent it out and break even with your mortgage payments, you’re gonna come out way ahead in the long run. Pretty good retirement fund if you ask me, and I think the gains are only half taxable (capital gains?)

    Another thing I’ve seen is the “Smith Manoeuvre” .. borrow against your house to invest and then you can claim the mortgage interest on your taxes … brilliant in my opinion.

    Brian.

  15. Braxton Haines

    June 13, 2008 at 1:36 am

    @Susan

    “Good Debt” isn’t necessarily an oxymoron. I owe $200K on a house that I bought for $290K and it is currently worth $400K… so if you look at it that way, the debt definitely isn’t bad, because it could be covered (and then some) by selling.

    Just my 2 cents… I’m a glass half full type of guy though! 😉

    PS – Nice website, very clean!!!

  16. Susan

    June 13, 2008 at 9:35 am

    “Good Debt” isn’t necessarily an oxymoron. I owe $200K on a house that I bought for $290K and it is currently worth $400K… so if you look at it that way, the debt definitely isn’t bad, because it could be covered (and then some) by selling.”

    Thats definitely good debt and a good investment! Thanks for the compliment on the site.

  17. Mariana Wagner

    June 13, 2008 at 10:31 am

    Personally, I want to be 100% debt free … If I can pay cash for everything I want, then there is no need to carry around any debt. I do not want to owe anyone anything.

  18. Mariana Wagner

    June 13, 2008 at 10:55 am

    Thank you. I respect that viewpoint, and I love how technology has helped free our time up. My investments do/will consist of IRA/real estate investements. I just do not like “owing” people/companies anything.

  19. BawldGuy Talking

    June 13, 2008 at 1:33 pm

    To each their own. So much relies on comfort zone.

  20. Benjamin Bach

    June 13, 2008 at 1:38 pm

    Mariana, I know some people who own everything free and clear, including some notable exceptions to the rule – rich ones.

    Let me clarify that – wealthy ones. The *wealthy* people I know that own and develop real estate have lots of cash. Not a couple million, not 10 million, but *lots* of cash.

    Until I have that kind of kesef, I’ll use good debt and positive leverage to my advantage.

    BenjaminBach.com

  21. Susan

    June 15, 2008 at 4:59 pm

    Being 100% debt free sounds great if I could still have a substantial amount in the bank to fall back on. Right now, I do have some good debt which I will keep for a while because I like having my money in the bank to use if I need it. No need to give it to anyone sooner than necessary.

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Business Marketing

Lie To Me? I Saw You Twitch…

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Whatever You Do, Don’t Blink

I don’t watch a lot of tv, mainly because I have a short attention span, and something has to be pretty compelling to catch my interest.  If you haven’t caught an episode of Fox’s new series, “Lie to Me” you probably want to check it out. The show follows Dr. Cal Lightman, a ‘deception expert’ who studies micro expressions and body language to figure out if someone is lying.  The interesting part of this (for me, at least), is that the science underpinning the show is the work of Dr. Paul Ekman, who holds a PhD in clinical psychology and has been studying facial expressions and body movement since 1954.

The show points out that facial expressions are universal, and frequently places photos of the show’s characters, frozen in emotion, next to cultural references making the same gesture or expression to illustrate the point. (The last show pointed out a ‘self comforting gesture’ of holding one’s own hand, with photos of Princess Diana and Michelle Obama.)  Darwin was the first to publish on the topic, in 1872, and Ekman’s work expands on that. The show also points out how expressions can ‘leak out’ without the subject realizing they’ve done it. I’ve spoken with a few different people who thought the observations in the show were so dead on (liars actually maintain eye contact, to watch and see if you believe their lies) that they were uncomfortable watching and turned it off.

Reading Your Clients?

From a real estate perspective, I am always using body language and facial expression to help read a client’s thoughts…it’s easy to see as you show a couple a home if they like it, without ever needing them to say anything. Granted, some folks are tougher to read than others.  I know lots of Realtors who have been trained to recognize and interact with different personality types, so perhaps a brief training in reading microexpressions could be useful too? Dr. Ekman’s company offers a Microexpression Training Tool that claims to teach you to read microexpressions in an hour’s time.  (You can demo the tool on the website, trying to guess on five different expressions. I scored an 80 percent, not bad!)

Although I don’t think that the focus on sniffing out lies is necessarily the most important use of the skill for agents, being able to read microexpressions could probably help you interact and communicate with your clients more effectively. Test out the demo and let me know how you did!

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G-Love

Thailand: Americans Are Scared – Want To Come Home

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This is not typical Ag but I hope you’ll allow me. I did get a hall pass, you know. But I don’t think this will excuse me from writing my regular post.

This is Michele. One of my dearest friends. She was supposed to be home from Thailand yesterday. At this point we have no idea when she’ll be home but we could sure use your help.

The Austrialians, Chinese, Japanese are all getting their citizens out while the Americans are seemingly – seeming to me anyway – to do nothing.


I’m asking for 5 minutes of your time today. Just 5. That’s all it takes to make a couple of phone calls. And I know you can do it because you can market anything.  All we’re doing is marketing an idea: Get them home.

Call your Senators  It’s a drop-down list.  Click on your state and dial.  Get a live person.  Just hit 3 or whatever.  An extremely helpful aid will answer.  Tell him/her that we must do something to get the Americans stranded in Thailand home.  That’s it.  It’s fast and painless. 

Still got 4 minutes left.

Email the US Embassy in Thailand:  ACSBKK@State.gov
Subject:  Americans In Thailand
Message:  Get our American families home.

This will probably take the last 4 minutes:
Contact your representative.  This site will get you to their site and contact infoYou’ll need your zip code plus the 4 numbers that follow it.

Got a few more minutes?
Govenors

The White House

Twit Obama


If you have time to do one or all of these things you will make a difference.  All our voices will make a difference.  If you don’t have time to do any of it Lani will mail you a bag of flaming Cracker poo.

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G-Love

I Hate Animated Gifs

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I-Hate-Animated-Gifs

The hateful comment was to this post.

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