Whether you like it or not, sometime in your life you are, more than likely, going to be in some type of debt. Even more likely you are in some type of debt right now. How we use debt and experience debt in our lives will have such an impact in the wealth we accumulate and the freedom we experience. So, it is very important to not only understand debt, but understand how to use it, how to manage it and how to eliminate it.
Becoming comfortable with debt is an absolute must for creating wealth, however there is an important distinction to be made about the type of debt you are comfortable with. Good debt vs Bad debt. The simple definition as offered by Robert Kiyosaki is ‘Good debt puts money into your pocket’, ‘bad debt takes money out of your pocket’. What this really means is that good debt can build your wealth, bad debt will erode your wealth.
The state of the nation
We are in such a consumerist society now with a massive hint of instant gratification thrown in. We are taught that debt is a natural part of life, with all forms of credit freely available from credit cards, personal loans, store cards, loans for cars and boats. When we want things, we want them now. It is a fact now that the average consumer in Australia spends 121% of their income! Yes you read right, all earnings are spent and then an extra 21% is spent on top of that through accumulating more debt and then more debt and then more. It is no wonder why most people are broke and simply are working to pay their bills and trying desperately just to make ends meet. Many other countries are facing the same debt addiction situation.
Debt is a part of our lives, whether you choose to be in debt in the route of spending for instant gratification to keep up with the joneses or whether you use ‘good debt’ or investment debt to build your wealth through investing, we need to understand debt and how to use it and manage it in our lives.
The Psychology of Debt
There is truly a psychology behind debt and an understanding to it, which you must grasp to truly master it. Most people see debt as a very negative thing, but if you truly understand debt, then you can begin to strip away all of the layers of stories and old belief systems you have about it and learn to use it and master it.
Be Grateful for Your Debt
Be grateful for your debt. This is something I learnt from Demartini: That debt is previous investment in you. Someone or some company in the past has believed in you enough to lend you some money and you now have the opportunity and gift of repaying that belief.
Powerful right? And when you shift your focus like this, you can actually become grateful for the debt that you have and feel thankful to be able to repay it. When you don’t appreciate it, you don’t want to pay it, but when you find the gift in repaying that investment in you, it becomes much easier and even satisfying if you want it to be. Start by looking at each of the debts you have right now and find the investment someone made in you and the gift it is, be grateful for each and every debt and change your perception of it.
Shift Your Focus
“What you focus on, you get more of.”
This next bit may seem a bit counter-intuitive; however if you want to really take debt away from being a problem in your life, stop focusing on it.
Instead focus on maximizing the other areas of your life, so you can eliminate debt, not through going without or through sacrifice, but through creating more abundance in your life and creating more, by becoming more.
Here are two key ways to do this in your life:
1. Become more efficient: Find all of the places you are wasting money right in your life right now and learn to become more efficient and productive with your finances, this can be done through budgeting, negotiating lower rates with utilities, doing an audit on every cost you have in your life. Start running your finances like a well-oiled and lean tight ship.
2. Focus on creating more income: while you are looking for ways to become more efficient, also focus on becoming more valuable as a person to the marketplace, so you can get paid more and create more profit allowing you to more rapidly eliminate your debt.
Guess what happens now you have eliminated the debt? You now have a big chunk of spare cash flow in your life and run a more efficient ship with your finances, you can use this to begin investing to create wealth and you will have also grown exponentially as a person.
Notice in any of these points I did not talk about going without or anything to do with lack or scarcity. What we are focusing on is creating more and becoming more as a person and as a wealth creator. The psychology behind this for you in not only eliminating debt, but in becoming truly wealthy is huge. Re-read it again and let it sink in.