How to Turn Your Debts Into Wealth Now

Don't let debt keep you on a tight leash when you can turn it into wealth.

Debt can seem like a dark cloud that hovers over you for years. Conventional wisdom says to get rid of your debt before you try to start building wealth, but that could take years and years of simply trying to get back to zero. Then you face more years of trying to build wealth. You can do something right now to reverse this thinking and begin converting debts into wealth. It will take a brand new way of looking at your money, but you can approach the debt/wealth problem in a more productive way than you may have previously tried.

Instructions

1. 

   Don't let interest rates weigh you down.

   Call all of your creditors and ask them for a lower interest rate and lower minimum payments. You may find yourself surprised at how easy it is to get some relief just by asking, especially if you have a history of steady, on-time payments.

2. Sign up for a zero percent balance transfer offer from a credit card company. These offers often come in the mail, or you can simply call major credit card companies and ask if they have any current zero percent offers. These companies will let you consolidate all your debt into one place and carry a zero percent interest rate for a year or more.

3. 

   Put pen to paper and figure out your minimum payment amount.

   Find out your minimum payment amount, whether you consolidate all your debt into one credit card or simply have your debtors reduce your payments.

4. Add 20 percent to the minimum payment amount. Make this the amount you pay each month. You will pay off the loan faster this way than you would if you simply made the minimum payment.

5. 

   Find an online broker and open an account so you can build your nest egg.

   Open a brokerage account with an online broker. You can open the account before placing any funds in it.

6. 

   Stop spending on extravagances and start spending on your future.

   Cut spending. Find places in your household budget where you waste money, such as eating out, happy hour, or too many cable channels. Get rid of the excess so you can grow your wealth.

7. Choose an amount you will invest each month. Pay yourself first by setting an amount for investments just as if it were a bill. You always pay your bills, so always pay into your investment account. These funds will come from any money you save by lowering your debt payments, plus spending cuts. You can add any extra you earn through overtime or a part-time job.

8. 

   Every time you save $1,000, invest it.

   Save $1,000. Every time your investment account reaches $1,000, buy an Exchange-Traded Fund (ETF), mutual fund, stock or other investment that promises growth. Study these investment vehicles while you save your first $1,000. The reason for waiting until you have $1,000 is that your online broker charges a transaction fee, and this will be a smaller percentage if you wait until you have $1,000, rather than investing in smaller increments and paying the fee each time.

9. Stick with the plan. Time will take care of your debts and your wealth if you just keep the cash flowing where you want it to go. In a much shorter time than you imagine, your investments will rise and your debt will decrease.

Tips & Warnings

• The best way to pay yourself first is to set up automatic payments into your investment account. This can be done through your online broker, under "set up ACH payments" or a similar heading. "ACH" means Automated Clearing House, which is a big name for a simple idea: electronic payments. You can designate an amount and a day of the month when you want an amount transferred from your checking account to your investment account.

• Do not close any credit card accounts, even when you pay them off. This hurts your credit rating. Just put the cards away or destroy them, so you won't use them again.

• Your investment money is not rainy day money. Do not use it for any expenses.

References

• Afro Articles: Turn Debt into Wealth
• Millionaire Money Habits: 4 Steps to Turn Debt into Wealth
• Man Down: Debt or Alive

Resources

• Ameritrade
• E-trade
• The Motley Fool: Exchange-Traded Funds
• Investopedia.com: Mutual Funds Introduction
• TheStreet.com: Getting Started with Stocks