Receive regular updates via email

Managing debt by expanding your assets

Previous articles have discussed various aspects of debt management, including changing one’s approach to debt. Those changes can included reducing the total amount of debt, reducing the number of debts, looking at different financing options, and understanding the difference between a positive debt that leads to long term positive financial results, and negative debt that only produces expensed and creates no benefits.

One of the golden rules of debt is related to the last distinction of a positive or a negative debt. A positive debt incudes debt that is finances an asset that produces income that exceeds the costs of debt service and the other costs associated with that asset. An investment in an apartment building that produces a positive cash flow each month is an example of a positive debt.

Another kind of positive debt would include an educational loan that allows someone to find employment that produces a higher income, even after taking the educational debt payment into account. These very same debts could become a negative debt if the investment has a negative cash flow or if the educational loan doesn’t lead to a job or a pay raise.

While managing or reducing debt can be a primary financial goal, sustainable financial stability is much more likely to happen when you have assets working for you. Your assets can range from cash in a savings account or other low-risk paper asset, or a business or real estate investment that provides a positive cash flow every month.

If you don’t have any assets at all, it is probably smartest to start with a low risk asset like a savings account or precious metals. If you are going to use some kind of paper asset, it may be best to put it into an account that is not easily accessed to keep you from being tempted to spend it quickly.

Precious metals may fit into this kind of strategy, since you can’t just take a silver bar or a gold coin 1 oz gold american eagle to the store and use it like a common currency. You have to first take it to a coin dealer and exchange it for regular money before you can spend it. Gold and silver have an additional advantage as it can be used as a hedge against currency fluctuations and inflation.

Even if your debts are far larger than your assets, having even a tiny amount of assets to your name could do wonders to make you feel better about your financial situation and your prospects for the future.

Do you know your cash flow from your capital gains?

When it comes to investing, words and definitions matter. If you don’t understand the question in the title of this article, then you might be easily fooled by a fast talking financial salesperson, or you may pass up an outstanding opportunity because of your lack of knowledge. If you are confused by the terms in the article, stick around, by the end of this article, you will have a good idea of the difference between cash flow type investment and a capital gain type investment.

The basic definitions are simple enough:

  • Capital Gains – If you invest for capital gains, your goal is to sell something for more than you bought it. In order to receive the gain, you typically no longer own or control the asset. Stocks that don’t produce dividends are a classic capital gains investment. Another type would be investing in unimproved land.
  • Cash Flow – If you are a cash flow investor, your goal is to receive a series of cash payments from your investment, and you typically still own or control the asset. Long term ownership of dividend producing stock fits this model, as does investing in rental real estate.
  • This is a very, very simplified description of the different between cash flow and capital gain investing, and you can read any number of books that go into the details. Depending on what kind of investing you are doing, you probably have to have a completely different approach depending on which kind you are doing.

    The key to remember is that any type of investment vehicle may include both cash flow and capital gains. Whether one type or another is best for you depends on the investment and a variety of other factors, including your near term and long term needs for a return on your investment.

    For example, if you are investing in a company that specializes in advertising on radio, if you purchased the company and intend to keep it for several decades, you may want to do so only if it is a cash flow type investment so that you can pay the employees and other overhead costs. If you think that radio will be a dead medium in five years, you may want to take a capital gains approach and position to sell the company quickly, and profitably.

    Manage Liquidity Issues through Online Payday Loans

    If you are having trouble meeting some of your financial obligations or are weighed down by an emerging problem in your finances, then you should consider finding a bailout plan that can support your cash position until you receive your next paycheck. Like the US the UK faces some major challenges ahead amid the lingering problems across the region. There’s definitely a great deal of concern amongst the working class, with continuing pressure to earn more amid limited job opportunities. One also has to contend with a tighter credit regime and rising interest rates. Feeling the brunt on both ends of the spectrum, you may need to find a reliable funding support to help make ends meet. Under these prevailing conditions, you may want to look for the best sources for payday loans.

    Looking for Instant Cash Solutions?
    Financial managers stress the importance of proper use of payday loans. This credit option should only be used during emergencies and short term cash shortfalls. UK working professionals can borrow an amount ranging from £100 to £1000. The funds can be used for many things such as settling bills that are about to become due or to pay for emergency repairs on your car or in your home. This is an ideal alternative to banks and similar lenders. These other loan sources may force you to borrow more than the amount that you need, which translates to higher interest payments, despite the low APR.

    Rollovers and Long Term Use of Payday Loans
    UK consumers and working professional who observe sound management practices will not have any problem when they avail of this short term funding support. It is clear to them at the very outset that payday loans are meant to be used as short term financial tool. This means that you need to resolve payment issues and concerns before you decide to submit your loan request. There are two things that you must remember when it comes to payday loans. First, unsecured credit option comes with a high APR and it could be disastrous if you use them longer than the recommended period. Second, you must avoid rollovers at all cost as these can drag you into a vicious debt cycle.

    Short Term Use of Payday Loans
    Payday loans allow you to receive funds right away and use the same to address emergencies and unforeseen expenses. However, you have to borrow only the amount that you require and adjust your budget so you can repay the loan when when it is due. Remember the most important rule of payday loans – pay the loan on time. While some lenders offer the option of term extension, rollovers or even taking out a second loan to pay off the first one can only make matters worse.

    Savings stop as the economy slows

    Since the global economic recession of 2008 began, life has been difficult for the everyday American. The cost of living has increased and it has become tough to manage competing priorities.

    Wage freezes, unemployment levels of 9.1%, a struggling real estate market and an increase in day-to-day living expenses have all combined to make it harder to survive, let alone prosper!

    Yet most Americans do not have a safety net to help overcome these financially tough times. Statistics suggest that one in four citizens do not have any savings at all.

    This is a worrying situation, as a lack of savings means there is no emergency fund for when the going gets tough. A range of financial products can help with savings, such as those offered by short-term loan companies.

    The recommended amount of savings suggested by industry experts is the figure you would need to cover a minimum of six months without an income. Yet only around 25% of all Americans have such financial security and these tend to be higher wage earners in the 50-60 years age bracket.

    In today’s economic climate, it can on the surface seem hard, if not impossible, to find the money to save. Many households are experiencing increasing levels of debt instead.

    According to published statistics, Americans have just under £118,000 dollars of debt per household. The combined personal debt of all Americans reaches a staggering $2 trillion dollars.

    Savings are essentially an emergency fund for when the unthinkable happens. We all like to imagine we live in a certain world, but illness and unemployment can affect anyone.

    Warnings and forecasts of a ‘double dip’ recession are hopefully nothing more than a worst case scenario, but those with savings have a greater piece of mind.

    How would you cope in such challenging circumstances? For many people, that can be a frightening thought. However, it does not have to be, because you can easily take action to create a safety net.

    Take a long, hard look at your income and outgoings. What could you honestly live without each month? A treat meal or night on the town, or perhaps the latest gadget or game?

    If you can save even a small amount each month, the dollars will quickly add up. $50 dollars per month multiplied by twelve months is $600 dollars per year to invest.

    It may not sound much but once you start saving, you will find that the great feelings it creates become addictive! Soon you will be happily contributing more each month to your emergency fund.

    After all, this is the basis of the American Dream, to rise up against adversity and carve out your own road to freedom and success.

    There is no greater freedom than financial freedom that comes from you yourself making the effort necessary, as the odds of winning the lottery are narrower than getting struck by lightning!

    People who create better financial circumstances for themselves and their families gain much more than an emergency money fund. They gain a peace of mind and feeling of accomplishment too. Create your destiny now.