Chris Childs

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Stop giving the banks your money!

It is amazing how we tend to just accept some banking fallacies as fact. Like a home loan takes 25 years to pay off – did you know that the Latin definition of ‘mortgage’ is ‘agreement until death!!’ Seriously! The other trick that most of us fall into is to use the banks’ money on a credit card and then pay for it forever.

I received an invitation the other day to increase my $7k credit card limit to $14k ‘as I was a good payer’. The fine print on the back stated

‘if you increase your limit to $14k and you use the funds and pay only the minimum payment it will take you 66 years to repay the money!” SIXTY SIX YEARS!! I would have paid the $14k dozens of times over.

The same goes for mortgages really.  The banks tell you how to do your banking which is really like asking the mouse where to put the cheese.  Even some number one best-selling authors tell you how to do your banking to make the banks the most money – crazy really.

The easiest way to save the most money is to offset your money against debt at all times. Don’t think that having your money in low cost bank accounts with ‘high interest’ is the way to go…

There are two major flaws to that way of thinking.  

1. You will never earn as much interest as the banks are charging you. 

2. You will also pay tax on your earnings.

By putting your money in the same bank as your debt, e.g. your mortgage and offsetting debt with an offset account, a line of credit or in the redraw facility of your loan will mean you are earning around 5% tax free.  Possibly more than most share portfolios are providing their investors.

The next big hint is – don’t have money in savings accounts if you have credit card debt you are paying interest on.  It just makes no financial sense.  If you suddenly need the money again – you can use the credit card to pay for it.  However, if the emergency doesn’t arise – you have reduced debt and saved a bucket load in interest.  (Also, you have up to 55 days interest free on the emergency if you use the credit card and not a cash advance.)

Cycling your funds through your credit card also reduces interest payments as long as you spend less than you earn… I call this avalanche debt reduction. I teach people how to dig their way out of multiple credit cards the quickest possible way by using your money to benefit you instead of the bank.

At the end of the day – if you want to become wealthy I would suggest two things:

Firstly – I have often noticed that rich people actually wear shoes… so if you are really interested in getting out of debt and creating wealth, be careful who you take advice from.

Secondly – if you want to become rich – do what rich people do.

  1. Rich people don’t waste money. They have money, they can afford to buy or do whatever they want. What I found interesting is, they seem to be very careful. They check the restaurant bill before paying. Look at the quality of items and often put more of them back on the shelf than they actually buy. They don’t seem to throw away as much stuff as I see average or poorer people do. Is this because they don’t buy as many ‘junk’ items as others?
  2. Rich people don’t tend to live in clutter. They often have ‘nice’ houses with a few well-placed items on display, rather than dozens of bits and pieces cluttering a buffet or hall table. They seem to stay more organised, keep books on a book shelf, and don’t seem to spend their money on piles of magazines and other bric-a-brac.
  3. Rich people have learned how to make money work for them. Often rich people didn’t start off rich. Many actually grew up in middle class or struggling families and learnt how to be money conscious. They may have learnt if you are careful with the little things the big things seem to take care of themselves.  It may have been that they learnt to avoid credit card debt and other consumer debt, they may have learned the secret of paying yourself first and saving or perhaps stumbled on the biggest secret of all – paying off their mortgage to a point where they had equity – and using that equity to buy more property.
  4. Rich people know that using OPM (Other People’s Money) makes you money. Rarely are rich people fearful of debt.  They know you can’t get wealthy – really wealthy without it. Of the 200 richest people in Australia – 190 odd of them made their money through property in one form or another. (The richest person in Australia – a lovely lady who lives as a recluse in Sale, Victoria inherited her money – lucky her) but most are business people who have accumulated multiple properties. 

Get the Right Loan

A Line of Credit or an offset account is my preferred financial platform for fast debt reduction. I also prefer to split the debt into 2 sections, a Line of Credit and a Term Loan. This enables you to have a smaller chunk of debt to concentrate on paying off at first, therefore you can see a bigger result more quickly which will keep you focused and motivated to do more! How do you eat an elephant? One bite at a time!

The banks tell you how to do your banking which is really like asking the mouse where to put the cheese.”

If you want to learn more, this is just one of the Life hacks in my ebook, you can download it here

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