2022 Goals: Top Sources of Consumer Debt and How To Get Rid Of It

What does the new year have in store for us? Will 2022 be a year of high inflation and supply shortages? Time will tell, but there’s one thing we must do during these uncertain times: get rid of consumer debt.

Not all debt is the same. For example, we have business debt and consumer debt. Do you know the difference between the two? What many people may not know is business debt is often considered good debt, while consumer debt is bad debt.

What is Consumer Debt?

Consumer debt is defined simply as “debts incurred for use by an individual for family, household, or personal reasons.” In most cases, consumer debt is debt incurred using credit cards or loans received for cars or furniture. When people think of being in debt, they often think of consumer debt

Examples of consumer debt purchases include the following:

  • Televisions/electronics
  • Clothes
  • Appliances
  • Household items
  • Food
  • Bills
  • Motor vehicles (automobiles/trucks)
  • Vacations

These items may seem like great purchases at first, but over time they can be devastating to your budget and savings.

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If bought on credit, this television could take years to pay for if making minimum payments.

Working For Money

If a person isn’t careful, they can quickly find themselves working just to pay on those credit cards every month. That car note and furniture bill must be paid. Thanks to inflation, it costs more to put gas in their car and buy groceries. Each of these purchases add up and over time, the majority of their paycheck is spent on bills.

Rising gas prices can put a major strain on finances.

Thanks to inflation, many people may resort to using credit cards even more just to get by.

In addition, we are conditioned to get a job and “reward” ourselves with things. For example, if we get a nice job, what do we do?

  • Get a nicer/newer car
  • Move to a more affluent neighborhood
  • Buy nice things (clothes, television, furniture, etc.)
  • Go out more and enjoy life

In many instances, these items are purchased on credit, causing some to live check-to-check in order to pay for them. The effect is an increased reliance on that job (and paycheck) to maintain their standard of living. It is for this reason many of us only have $400 in savings, and can’t afford to be out of work for an extended period of time.

It’s a dangerous cycle that few of us can get out of.

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Getting Out Of Debt

How are we told to get out of debt? Usually we have 2 options:

  1. Cut back on expenses
  2. Get a better paying job or a second job

This can work, but this isn’t the best option. In order to get out of consumer debt and stay out of it, a change in mindset is essential. One of the first steps it to live within your means.

Don’t Get Another Job, Get Another Income Stream

There is nothing wrong with wanting nice things, but how we get them is what gets us in trouble. Instead of working to buy items that lose value when we purchase them, what if we bought things that retained their value or even generated revenue?

This is the concept of making money work for you.

For example, wealthy individuals have multiple streams of income. This is not to be confused with multiple jobs. Instead, they have various assets that generate revenue. Examples of assets include the following:

  • Dividend paying stocks and mutual funds
  • Bonds
  • REITS (real estate investment trusts)
  • Businesses (entrepreneur)
  • Monetized social media (YouTube, websites, blogs, etc.)
  • Royalties (books, music, publishing rights, etc.)
  • Rental property
  • Vending machines
  • Precious metals (gold and silver)

This information isn’t taught in school, but is well known and practiced by wealthy individuals. It is for this reason we have written these books: Invest For Success: Millionaire Wealth Strategies Not Taught in School, and Planting Seeds: The Children’s Guide to Entrepreneurship. Pick up your copies today on Amazon.

Each of these listed above (minus the precious metals) can generate revenue on a consistent basis. The strategy is simple:

  1. Purchase an asset.
  2. Grow and cultivate that asset.
  3. Start receiving cash flow from the asset.
  4. Purchase desired item from the revenues received from asset.

If done this way, you now have your desired object and still own the revenue generating asset. Using myself as an example, if I want a new pair of shoes, I won’t go out and buy them immediately. Instead I will purchase them with royalties I receive from online book sales. That means I will have my new shoes in a couple weeks or a couple months, depending on how many books I can sell.

I have written 11 books total. I will use my passive income stream to purchase what I want, monies received from ghost writing will be used to buy things I need, such as food and gas and mortgage. If I want something I really don’t need, (new shoes, a shirt, etc.) I use money from my passive income streams to get it i.e. book sales.

This way, I don’t go into debt.

When done this way, people think you’re spending your “hard earned money” on material items but you’re not. You’re simply spending money you made while you were sleeping. Your main monies are used to pay your primary living expenses.

This type of spending philosophy is used by wealthy people as well. If they want a fancy car, expensive jewelry or any other nice item, they don’t go out and buy it. Instead, the financially savvy ones will use money from dividend paying stocks, rental property or royalties to purchase the item. The average person sees the flashy items, not realizing it was paid for in cash, and not from their primary income source.

Change Your Mindset, Change Your Life (Business Debt)

As I said before, this type of thinking isn’t taught in school. We are taught to get a job, and that one paycheck will pay all our bills, living expenses, and for whatever else we want to buy for pleasure. If it’s not enough we are told to either get a better paying job or a 2nd job.

We are then told to save enough for retirement and live off those savings. This type of thinking will get you trapped into working for money and working your life away. The key is multiple streams of income and passive income.

Instead of consumer debt, a better option is to have business debt. Business debt can be defined as monies used to fund a business. For example, money borrowed to purchase real estate, a company car or a franchise is referred to as business debt. Unlike consumer debt, which is used to purchase items that lose value, business debt is used to to acquire assets that retain their value and can generate revenue. That revenue is then used to pay back the loan.

For example, if a person gets a loan to purchase real estate, the monies received from monthly rents is used to pay back the loan. If a person gets a loan to purchase or lease vending machines, the monies received in sales of candy and soda is used to pay for the machines.

In each instance, the loans are eventually paid off with the proceeds, and now, you own the asset outright and receive the monthly proceeds free and clear. These proceeds can be used to buy more assets. Using myself as an example again, I also buy physical gold, silver coins, and small amounts of bitcoin with revenue received from book sales.

Patience is Key

As I said before, this type of thinking is not taught in school. It’s critical you learn everything you can about how money works and the various ways to generate revenue that do not involve a traditional 9-5. Register for my online course on generating passive income: Tired of the 9-5? How to Retire Early With Passive Income. Available on Udemy.

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