Debt Challenge

I challenge you to eliminate your debt! 

This is a big fundamental in building wealth. By the way, we are talking about bad debt here. In case you don't know, there are two types of debt. There is good debt and bad debt. A good debt is a debt in which somebody is paying that debt for you. An example of this is when you bought a real estate property let's say a condo unit and you had it rented out. In this case, you had the tenant pay your condo unit's monthly amortization. You indeed have a debt through your bank loan however your tenant is the one paying it through the rental income you receive each month making your loan a good debt. Having good debt is a good way of leveraging which is very essential in building wealth.

On the other hand, a bad debt is a debt that you're the one paying. Imagine the same scenario above but for some reason you were not able to get a tenant to rent you condo unit. This debt becomes a bad debt since you'll be obliged to pay the monthly amortization. It takes money away from you pocket. Really good investors don't really pay or at least put out a lot of money in order to acquire assets. They're usually very good in leveraging with banks.

So let's get back to eliminating debt. Whenever I say the word debt here, what I really mean is bad debt. It takes a lot of commitment and discipline in order to get rid of debt. I remember back around 5 years ago when I had a debt of around 100 thousand pesos I accumulated from using my credit card. I know it's not that big of a debt but who knows how big it will get if I did not decide to get rid of it right? I'm the kind of a logical person so I get stressed if I see some issues or problems around me. I know if I don't take care of these issues logically it will hunt me down in the future that's why I intend to resolve these issues... financial issues to be exact.

After attending the IMG seminar and learning that elimination of debt is one of the foundations of building wealth, I had a realization. I thought to myself that if I was able to build this big of a debt (for me it was already big at that time) then I should be able to build this much for savings instead. I twisted it around. So at that time around 2010 I decided to eliminate my debt and instead just build my savings equivalent to the debt I once had which is around 100 thousand pesos. I made the problem a challenge for me to overcome and it went well for me. From that point in time until now, I can honestly and proudly say that I have zero debt. I'm on my way to get some good debt though since I have to get loan to finance my real estate investments.

I have heard countless of debt stories throughout my life. I even had a good friend of mine who accumulated a lot of debt during his 9 years of working abroad. It's so sad to think about it and there's nothing I could do as a friend to help him solve his financial problem. All I know is I learn a lot from this stories and experiences and I take action to things that I can control like debt elimination. I feel good and free knowing that I don't have any bad debt to worry about. I may not have the latest gadget and branded and cool clothes my friends and colleagues have but what I do have though is peace of mind and that for me is priceless. I know for a fact that I will be able to afford it in time if I stay patient, committed and disciplined towards my goals in life.

To end this blog post, I challenge you to eliminate your debt and instead turn it into savings. To illustrate, if you have a debt of 300 thousand pesos, I challenge you to eliminate it for one year or as fast as you can and on the following year is you have to build a savings of 300 thousand pesos and build it from there. I tell you that it's gonna be worth it and it will forever change your life financially.