One debt I wasn’t expecting to get hit with was from the IRS. I received a letter from the IRS stating that I owed $610 since I didn’t put aside enough money in taxes last year. As an entrepreneur it’s up to me to put aside the proper amount for taxes which is one thing that I do miss about having a 9-5 they handle the taxes for you. It is tough seeing how much money you made and then having to manually put the money into as separate savings account for taxes. Last year I was only putting aside 25% of my earnings towards taxes, when I should have been putting aside 30%. You live and you learn and for 2018 that’s exactly what I’ve been doing. I’m thankful that I only owe a couple of hundred dollars vs a couple of thousands. #Hallelu via GIPHY I do feel as though once you’re debt free people think that you will be debt free forever which isn’t always the case. In today’s post I wanted to share 3 lessons I’ve learned about debt.
#1. Wealth and debt can indeed co-existvia GIPHY Most wealthy people have debt. They use debt as leverage to help them increase their net worth this is especially true when it comes to real estate. In a business Insider article twin brothers who turned a single house into nearly $8 million of property stated they
“had both been working in commercial banking and noticed a trend among the tax returns they analyzed: The people with the highest net worth owned real estate.”Without getting a loan from the bank it would be super hard for people to buy homes because not many people can afford to just purchase a property with $400,000 of straight cash. I don’t believe that people should be afraid of debt especially if it can help increase your net worth over time. “Keep in mind that when you determine your net worth, you must subtract your liabilities – including your mortgage. If your home is valued at $300,000 and you owe $200,000 on your mortgage, your home will effectively add $100,000 to your net worth ($300,000 – $200,000 = $100,000 equity).” I’ve always been a fan of real estate and one day I do plan to own properties. A friend of mine Kendra owns more than 7 rental properties and now she teaches other people how to get started in real estate. We actually taught a masterclass in February on “The things I wish I knew before buying my first home” Here is some of the things we talked about during this one hour workshop:
- Renting vs Owning – an honest look at the pros and cons
- The credit mistake I made 10 years ago that I am still paying for today, and how to avoid it
- 3 ways to get over the down payment hurdle
- 5 things you can start doing today to prepare for home ownership
- What is a debt to income ratio, why it matters and how you can fix yours