Learning to Respect the Power of Debt as an Entrepreneur
I’m learning to respect the power of debt as an entrepreneur.
Previously I’ve thought it was best to live within my means and only spend money I had on hand.
Cash all the way, debit as a back up, all debt is bad.
This was how I’ve treated my personal finances from 2006 through 2015.
Essentially living pay check to pay check, or I couldn’t miss more than 30 days of work without falling behind on bills and life essentials.
All debt is not bad debt.
There is good debt, and being able to understand the two is the first step to leveraging debt, to create wealth.
I don’t believe in minimizing things that I truly desire or value in life. Starving myself from things that I truly desire often makes me desire them even more than if I had entertained the desire.
I can manage my money without lowering my standards or living below my means.
Discipline is something that comes naturally to me. This is self-awareness. Often discipline is a fleeting attribute that diminishes over time for most.
I have found that I have an ability to stay focused and disciplined in the face of distractions and influences, others succumb to.
Debt wasn’t my problem. Understanding debt was.
Robert Kiyosaki puts it best.
Bad debt takes money out of your pocket and he says spending on things like clothes, electronics, mortgages, or a car, are liabilities that cost you money.
Good debt makes money for you. It’s the debt you use to invest in assets that puts money into your pocket while it pays for itself.
Entrepreneurship is about collecting assets that puts money into your pocket, and leveraging good debt to do it.
Until you are debt free as an entrepreneur,, you’re really not an entrepreneur because you have bad debt.
You cannot leverage your capital or assets because your liabilities out weigh assets.
Since I’ve worked to remove all of my debt and having repaired my credit, I will pay myself first.
I’ve heard multiple ways of paying yourself first. Grant Cardone teaches to take 40% off the top. Robert Kiyosaki mentions taking 30% off the top.
Regardless of the amount, it should be divided up into three accounts:
- savings: which is your emergency funds
- investment: which is your capital resources to purchase more assets.
- charity: which is meant to give back to the less fortunate.
Currently my personal accounts are setup as instructed by Robert Kiyosaki, but my numbers are more what Grant Cardone teaches.
GC talks about living like your broke as an entrepreneur. Everything should remain the same even though your income is increasing. All of that money should be going into a saving or investment account till your ready to take action on an investment.
Both RK and GC agree savings account are for losers and dummies. You save to take action. You don’t save to become rich.
Charity has been on my mind for the past 5 years.
I’ve followed the wounded warriors project which helps marines and veterans who have been wounded in combat.
Knowing that these Marines made sacrifices for all of us in ways that have changed their lives forever is important. There are lessons and perspectives to be learned from these individuals.
So it’s important that I provide something for these men and women who preserve this capitalist country we all love.