Many people who are deep in debt believe that it is impossible to convert debt into wealth. Even the thought of it sounds to them too far-fetched and even outrageous. However, finance experts have discovered a sound principle, which could help one convert the amount of money he or she owes to the creditors into a small fortune of their own.
When speaking of wealth, the most important thing that you should take into consideration is your principle, i.e. your initial capital. This initial amount of money is something that you should protect like the apple of your eye, because it is the key to your successful turning of debt into wealth. It should be mentioned that your principle could be your own money, but this is not always necessary. Usually, when a company wants to expand its activities and attack new markets, it takes out a loan and this is how debt is built.
Either way, building wealth boils down to accurate and timely calculations. If, for example, you invest your principle and get a new amount of money that is slightly higher than your initial capital, this means that you have made the first step towards converting your debt into wealth.
Now that you have made a small profit, you can put it in a high-yield savings account and let your money work for you. On the other hand, if you have accumulated multiple debts, you have to try and negotiate lower interest rates with your creditors. You can either ask your crediting institution to lower interest rates or transfer the debt to another credit card. Some banks offer an interest balance transfer of zero percent for the first year. Then, you should use the snowball strategy to deal with your debts – pay the minimum amount on all of your debts and put all the free cash you are left with against the debt with the highest interest rate.
It is a wise wealth-building strategy to open a registered retirement savings account. It is a usual practice for companies to match the money that is put in up to a certain amount. Remember that this is free money. You might also open an investment account for various types of investments. An account brokerage can help you in opening the account.
Finally, once you have paid off your debt, do not forget to feed your investment account on a regular basis. Once again, the snowball strategy comes in handy but this time, you should deposit all your free capital in your investment account. While it is wiser to repay your financial obligations first, some individuals become motivated on seeing their portfolio expand. If this is your case, you might set aside a certain percentage of your income and use it to increase your wealth.