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Why Credit Cards are Good

Why Credit Cards are Good

Many of us have been conditioned to believe that getting into debt is bad, that spending money is bad, that owing people money is bad. When you grow up where everyone works a 9-5 job, trades time for money, and saves for retirement, the norm is to not owe anyone money and by the time you retire, you’ll be debt free and living off a 401k. Unfortunately, those days are likely gone.

We’re at a shift in the world where more people are working from home, don’t want to spend the next 40 years working for someone else, and are understanding the value of time and the value of being their own boss. So, how do you make the shift? How do you go against the years and years of conditioning that you experienced growing up about money?

First, read some books that will open your mind a little to the possibilities of leveraging debt. Secondly, attend a workshop to hear about the opportunities you could invest in if you just make a couple shifts in your thinking. When it comes to investing, especially in real estate, it’s more about having access to capital. The more access you have the more opportunity for deals you’ll have. It’s always better to have access to capital and not need it, than to need it and not to have it.

So, let’s take a credit card for example. Many people say credit cards have a high interest rate, they have fees, and it’s easy to get into debt. All of that is true, so let’s break each one down.

Interest rate:

When it comes to leveraging money, it’s not about the cost of it, but more about the return. Meaning, it’s not about how much you spend but about how much you can make. So, let’s say we can’t qualify for a low interest loan … but … we have a credit card. If we use our credit card to buy the cash flowing asset and pay 24% interest to do the deal but still make the money we intended to, what’s wrong with paying the interest? There’s a saying that goes, “You can pay interest and do the deal, or don’t do the deal at all. You can make money, or you can make excuses, but you can’t do both.”  Making sure that you calculate your costs into your budget will validate the use and if it doesn’t work out, then it doesn’t. Move onto the next opportunity.


Fees :

Fees are bundled into the mindset we shift to for understanding interest, but also, no matter what type of money you use to do a deal, you’ll always pay some type of fee. Transaction fees, service fees, they’re inevitable. However, a lot of fees are negotiable. Understanding how to communicate with creditors, banks, lenders, etc. is part of what you’d learn from Elite Legacy Education’s mentorship program and this alone is priceless. Having access to an educated conversation with people of financial decision-making power can positively impact your business in many ways. Learning from experience is critical for your future.

The Debt: :

Of course, racking up credit card debt as a consumer is discouraged, but if you instead use your credit cards to buy assets, the credit card becomes a tool. Assets put money into your pocket and liabilities take money out of your pocket. Think like an investor!

Let’s say using your credit card to buy an asset will cost you a monthly payment of $300, but what you’re buying will produce you $1,000 per month. In this case, you would make enough money per month to cover the payment on the credit card plus a positive cash flow. Your cash flow in this case would be $700. ($1,000 - $300 monthly expense = $700. This is not the full cash flow equation—just a quick example of how we look at debt from an investment standpoint for this scenario).

There are many ways to use credit cards to your advantage when it comes to business and investing. Legacy Education teaches about this in their Elite Creative Real Estate Financing course. There are several ways to fund deals, even beyond credit cards, but right now more than ever, credit cards can be an easy way to obtain capital or as we call it OPM. If you’ve been taught credit cards are bad or that debt is bad, we highly encourage you to explore as many other financing techniques that are available. Being creative with money will help you create wealth.

Areas of Review

Takeaway

Big picture takeaway points

  1. Investors think more about the return than the cost.
  2. Fees are always negotiable if you have the knowledge and ability to communicate effectively.
  3. Not all debt is bad.

Reflection

Self-reflection questions to think more about the content

  1. How much capital do I have access to on my credit cards?
  2. Would I be willing to pay a small fee in order to create some cashflow?
  3. Have I missed opportunities in the past because I didn’t think I had the resources to fund the deal?

Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!

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