This is the eighth article in a series of articles revealing the Myths that Keep Your Broke. In these articles, I will uncover the many myths that too many people believe. These myths can prevent you from creating wealth and complete financial choice™. Let’s start destroying them.

Myth #15: All Debt is Bad

For many of us, the word debt can be scary and intimidating. But not all debt is created equal. There certainly is high interest and misplaced bad debt. There is even necessary bad debt. However, there is also good debt that can help increase your personal investments.

Combining the right kind of debt with paying yourself first, you can build your net worth and ultimately have financial freedom.

First, let’s differentiate between bad debt and good debt.

Bad debt is the debt you incur in support of your everyday living. This can be debt from credit cards, car loans or other expenses that rollover from month to month and help subsidize your regular expenses.

On the other hand, good debt has a focus on growth. This is debt you incur to grow an investment. Let me give you an example.

Let’s say, you save for years and you purchase an investment property for cash (it can be a house, small apartment building or any other real estate investment). We will use a property valued at $100,000. In this example I will also omit any rental income from the property, or sales commissions, or other expenses and only focus on the appreciation. If in one year the property grows in value by 5% you could sell it for about $105,000. This makes your profit $5,000, or 5%.

Now, if instead of paying all cash for the property, you only invest $30,000 and borrow $70,000 of good debt. Ignore the loan payments, because if you rent it, the tenant is giving you the money for the loan payments. Here is how it would look at the end of the year with the same 5% growth factor:

You also sell it for $105,000, but you only put down $30,000 to buy the property. Now your profit is $5000 from a $30,000 investment. That’s a 16% return. AND, now you have $70,000 of cash left over to purchase two more $100,000 properties!

But beware; real estate investments can be tricky. In 2008 when real estate values plummeted, many people lost their properties because they were over-leveraged. The loans people owed were too high of a percentage to the value of the properties, and the properties’ value became less than the amounts owed. The same situation can happen in the stock market if you purchase stocks on margin and the value of the stock drops dramatically.

My wife and I have been conservative about the debt to value ratio when we purchased apartment buildings, and it had virtually no impact on us in 2008. The rents were stable, the loans were all paid, and we were able to ride out the downturn. Leveraging good debt takes knowledge, understanding of markets, and reading about and keeping up on trends.

It takes an investment of time and knowledge to use good debt to build wealth, but it is an investment that can have returns far beyond any paycheck you could earn.

Myth #16: The Wealthy Don’t Share Their Knowledge

If you read the headlines in our sensationalized news culture, you may believe that the rich get richer by hoarding their money and their information. But this isn’t true when it comes to the vast majority of wealthy people.

Being rich versus being wealthy is an attitude. Wealthy people tend to share their knowledge. They subscribe to a prosperity consciousness, not a poverty consciousness. They know that by sharing, they find prosperity in finances, and in life.

A key example of this is the information I have been sharing with you about the roadblocks to creating wealth and prosperity. For over twenty years I have not only grown my wealth, I have always found ways to share both my successes and failures.

I have written articles and books on building wealth, I teach courses at UCLA, and I have shared in this series how I have made mistakes in both saving and spending along the way. Prosperity is a journey, not a destination and it takes learning from others to keep you on the right path.
Whether it is learning from Bill Gates, Steve Jobs, Forbes or the Harvard Business Review, the wealthy are not stingy with their knowledge.

Wealthy people are often the first to share their failures, not just their successes. They are vulnerable with the truth and hope that others can learn from their mistakes. They learned that surviving and overcoming failure, and learning to overcome the fear of failing, was actually key to their success. Wealthy people want to share that knowledge with you. The more people that have prosperity in finances and in life, the better off the world will be for all of us.

In fact, if a wealth advisor does not want to share their knowledge, it may be bad a sign.

I once had a client (we will use the name Linda) who was asking questions of her financial advisor who appeared to be a nice lady we will call Hydra. Linda simply could not understand Hydra’s statements and every time she asked simple questions Hydra got defensive as if she was questioning her intellect. It turns out, Hydra was stealing money from the accounts of her retired clients and later went to jail. Often times when people hoard information, they are also hiding greed and deceit.

This series is about finding wealth and prosperity, not becoming rich. So it is good to know the difference between rich and prosperous people.

Prosperous people have nothing to hide, but much to give. Prosperous and wealthy people share their knowledge.

To Your Prosperity,


Author's Bio: 

Often in the media and in a recent TEDx Talk, Rennie Gabriel supports individuals and business owners to create work as a choice, instead of a requirement, just as he did for himself. Rennie had gone broke twice (two divorces), but using the same concepts published in his book, Rennie created more wealth in each recovery than what he had prior.

As a highly rated instructor at the University of California in Los Angeles (UCLA), Rennie uses his award-winning, best-selling book, Wealth On Any Income, to teach effective money skills from both the emotional/psychological aspects as well as the practical components. His book has been translated into five languages. Rennie is a retired Chartered Life Underwriter (CLU) and Certified Financial Planner® (CFP®) and often adds BFD to his credentials.

His extensive knowledge of real estate and finance is useful not only to those who own or invest in real estate but to anyone striving for a better life by trying to achieve financial freedom.

His clients range from financial professionals, like CPAs, stock brokers, and financial planning firms, to entrepreneurs in the transformational space (coaches, authors, and speakers). He also works with large organizations like the FBI, American National Insurance and Toyota Motors.

After 40 successful years in financial services, Rennie now works to donate 100% of the profits from his speaking fees, wealth programs, books and business coaching to charities, the primary one is where dogs are rescued, trained and donated as service animals for soldiers with PTSD and TBI (Post Traumatic Stress Disorder and Traumatic Brain Injuries)