10. You are not interested in money

You think that when you make enough money at work all your money related problems will take care of themselves

Actually the opposite is true – over 90% of people winning a multi million dollar lottery end up with less money just after 5 years of winning.

Getting rich takes effort and planning. If you are not interested in money then chances are that money is not interested in you.

9. You are afraid to lose your money

You are so afraid to lose your money that you keep it in an ordinary bank account with a terribly small interest rate. You are afraid to invest your money because you think that the risk of losing everything is too great.

By keeping your money on a savings account, it generates less interest than the inflation. This means that by keeping your money in a safe place you are actually losing it to inflation.

8. You invest in what you don’t know

After reading a story about a new high tech invention you decide to invest all your money into this startup company. If it’s high tech and complicated it must be a great invention, right?

Wrong!

Investing your money in what you don’t understand is the fastest way to losing everything. Something that looks like a good idea doesn’t have to be one. Stick to what you know and you will be able to keep yourself from the dumb ideas and go along with the great ones.

7. You hope that other people will take care of your money

You give professional money managers free will to take care of your money as they wish. Everyone wants to have more money so they will just end up making a lot of “necessary transactions” – of course you are the one paying the transaction fees.

Take care of your own money – always have the last say in what to invest and what to buy.

6. You want too much too fast

You want to get a lot of money fast and with little or no effort. This makes you go along with tens of get rich quick schemes that always end up losing money.  Your decisions are affected by the need to get a lot of money fast, which makes you take unnecessary and stupid risks.

You need to remember that there is no such thing as easy money.

5. You don’t have an emergency fund

You spend everything you make and don’t keep an emergency fund for unexpected things. If you are not covered by insurance an accident can set you back tens of thousands of dollars.

Without an emergency fund you would need to borrow to come up with the money. This also means that you will have to pay interest – not having an emergency fund can end up loosing you a lot of money.

4. Your goals suck

You don’t have any goals and even if you have one – its awful.

Just about every 10-year-old wants to be rich and famous but only a few will actually get there.
You need a goal that says what you want to achieve, how you are going to achieve it and by what time will it be achieved.

After coming up with a goal you will also need to make a plan on how to achieve it. You must be able to measure your progress at any point to get feedback on how you are doing.

3. You have bad habits

You smoke, drink and watch TV all day long. You spend money on the things that will never bring you anything back. In the long run you need to spend even more money on health in order to get back to your best drinking shape!

A bad and devastating habit can also be negative thinking. Research has shown that people who are more willing to keep their mind open and positive to new ideas are wealthier than pessimists.

2. You are impatient

You want to have everything now and are not willing to wait in order to buy it later. The concept of saving money for something you want to buy is not known to you – instead you use one of your many credit cards.

You probably haven’t heard that using a credit card makes other people rich (owners of credit companies) and keeps you poor.

1. You buy everything your neighbors and friends have

Trying to impress your neighbors and friends by buying all the stuff they have plus everything they would like to have? Don’t do it – spending money on things that you really have no need for is the number 1 reason why people have less money than they want to. Having a lot of things and having a lot of money are 2 things that contradict each other – you need to give money away in order to get stuff.

True wealth and money comes to those who are willing to wait – the 1000 dollars you choose not to spend on a new plasma TV with a giant screen can turn into 100 000 dollars in 20 years. Think of how much TV-s this money would get you then (as opposed to how much you would get when selling your TV after 20 years).

For most people it is difficult to put themselves in someone else’s shoes but for some reason I have always found it quite easy. They say that trying to look things as other people see them is a common characteristic for Libras!

I have to confess though that sometimes it is difficult for me to understand why other’s don’t realize the obvious! If I take something for granted I tend to forget that this might not be the case with someone else.

Some time ago I had a chance to play the famous Cashflow board game by Robert Kiyosaki. It was my first time!

While I was surprised how easy the game was (I was waiting for more of a challenge) – I was also surprised to see smart men and women doing very stupid choices! For them the game was very difficult – they couldn’t understand why they didn’t make any progress.

The main reason seemed to be that they did not understand the difference between good debt and bad debt.

The difference between good debt and bad debt?

Debt can be used in 2 ways:

1. To purchase something that you want or need. For example a big plasma screen TV.
2. To purchase something that helps you make more money. For example an apartment to rent out.

If you buy a new TV with your credit card, you will need to pay for the amount of the TV plus the monthly interest but at the same time you can not use your TV to make any money. Therefore the debt used to buy the TV is bad debt – it only takes money out of your pocket.

If you take a loan to purchase an apartment and rent it out – you will get an additional income stream. That way the debt is not used to make your life easier or for your entertainment (think TV) but as a means to make you more money. This is good debt.

For me it is difficult to grasp that a lot of people are unable to make that distinction and keep using their money in a way that makes them spend even more by having to pay interest or buying something that means additional expenditures!

Good debt

Good debt is often also referred to as leverage – it means that you are taking a loan in order to make more money in the future. Leveraging your money is a great way for people with little money to make big things happen. For example when you start a business that is funded 10% by your money and 90% by the banks money – your own dollars will be making a lot more money than when you fund the entire company yourself. This is basically because with the 90% of the banks money you are able to start a company on a larger scale and therefore make more money.

Here are some things that can be considered as good debt:

• Taking a loan to buy a house or an apartment for renting it out
• Buying a car in order to start a taxi service
• Buying a car to start a moving business
• Buying a computer to set up your home office for your newly started company – the computer must be essential for the business to function!
• Buying a stake in a company that regularly pays you dividends.

The difference between good and bad debt can sometimes be tricky! The exact same things bought by different people can be considered both good or bad debt – depending on what they are used for.

Bad debt

It is my experience that a lot of people have trouble recognizing some forms of bad debt. Consequently they make some bad investments that seem like good ideas but actually aren’t.

Here are a few things that are  sometimes incorrectly considered as good debt:

Taking a loan to buy a house

For some reason a lot of people think that since they need to buy a house anyway it should be considered as good debt. They feel that because the price of the house can go up (instead of down which seems to be the case lately) it is an investment.

Wrong! Your house does not generate any extra income. In fact – by buying a house you will instantly get several extra expenditures that must be taken care of. By buying a house you also buy a lot of regular expenses! Getting a house can only be considered as good debt when you rent it out or use it for something that makes you money. Financially speaking it actually makes sense to get the cheapest house possible.

Leasing a car

The same thinking goes here as well – “I need a car anyway”. A car can only be considered as an investment and therefore as good debt when it is bought in order to make you more money. Most people say that “Without my car I wouldn’t be able to go to work and therefore my car is essential for my income – thus it’s an investment”.

Wrong! However uncomfortable – most people could probably use a form of public transport to get to work. If you buy a car to drive to work you do not need a new and a fancy one – the cheapest one that drive’s will do. Anything more expensive than that is a bad investment and when bought on credit – considered as bad debt.

Buying collectibles

The prices of collectibles usually go up with time. That makes some people believe that if they use their credit cards to buy a rare coin or a comic book  or etc – it can be considered as good debt.

Wrong! Although it can turn out to be a profitable investment it is still bad debt! The only way that buying a coin on credit can turn out to be a case of good debt is when you start showing the coin for money and therefore get a new income stream!

If you still don’t understand

If you read this article but have trouble distinguishing bad debt from good debt you only need to remember the following:

Good debt – Gives you an extra source of income that you did not have before.

Bad debt – Gives you something that can be useful but does not give you an extra source of income. It only takes money from your pocket.

Related article:

• Understanding different debts

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