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So a lot of people don& #39;t know that you can create wealth from debt, the reason being that it& #39;s ingrained into us systematically for us to build two sides of the balance sheet, that is, the debit side or credit side.
this is done because it makes it easier for us to be able to budget expenses easily. it makes more sense for you to have things that reduce from your money on one side and things that give you more money on the other side and then to add and subtract these to find out the balance
But the problem from this becomes more obvious when we do this and the debit side grows more than the credit side, we tend to feel that the only way to go up is to increase our credit side which is not always feasible as less income becomes available.
Fortunately however, everybody innately has a reserve that does not show up on a balance of paper which they usually do not realise. This reserve is often formed through relationships with other people.
Before going forward, I would like to explain what money is. What is money? money goes by different definitions people usually say that money is a store of value and they will be correct, they will not be wrong.
but then they stop there and do not go forward to inquire into the nature of what this value is.This value has formed to be a number of things among which are time, effort and choices. Therefore it is safe to say that wherever a person has put in time effort and has made choices,
he should be able to make money from those ventures. The amount of effort people make on a daily basis is incalculable you make an effort to help even the most basic of relationships
U put effort into your family u put effort into ur friendships, u put effort into the state, u put effort into business ventures that belong to you or other people and all these institutions that effort has been put into r usually available when one falls into onerous situations.
These institutions can be called upon way of collecting loans from people either friends or other institutions where trust has been put into such as banks. When you pay trust(by way of saving your money in banks for instance, which they then invest),
trust also has a value which is often repaid inform of credit facilities which are made available to you and these facilities can be readily called upon.
It is also important to note that a reversal of this concept is true, that whenever that trust diminishes, money attainable from that source also diminishes.A rational person will not invest into a venture which he considers untrustworthy.
As such, a person who trust has been invested into must make proper use of that trust. He must mk wise investments nd whn wise Investments are made, d mny realised frm such ventures will b able 2 eventually break evn nd the profit can even b used 2 start up other bisness ventures
A lot of people have an attitude of never ever borrowing any money. they seem to think that this gives them a solid standing and he saves them from ridicule( It is a rational way to think I admit, but if you think like everyone you only make what everyone makes}
And because of that refuse to borrow money from people or from organisations. when reading this thread, I implore you to dismiss this notion entirely, because even the biggest and wealthiest corporations in the world have debt which they do not wipe out completely,
profitable ventures for instance like Manchester United has debt accruing to hundreds of millions of pounds and all the while they still remain one of the biggest sport clubs in the world.
Another way to look at this is that most incomes that people will obtain are in streams they come little by little compared to bulk credit facilities available to them. More often than not, most investments require solid payment all at once.
The old saying which states that "time is money" rings true because there is usually a problem of not being able 2 gather enough funds at d right time for a particular project with a limited window of opportunity,by using debt facilities, it is possible 2 gather money all at 1ce
For instance, in a cooperative society a person who earns 300 thousand naira a month can be guaranteed a loan of up to 5 million Naira at once, provided that he pays a sum of 150000 Naira monthly over the course of about 2 years.
now where that money is given, if the person may make a wise investment such as purchasing a school hostel or starting a business, by the time the loan has been fully repaid a lot of profit would have accumulated in form of rent,
after which the person may decide to sell the hostel for a profit or his business value might have doubled. Alternatively, the rent realised during the period of payment can be used to subsidize the loan payment.
A huge problem however is that when people acquire these loans they tend to buy liabilities instead of assets. This is a common problem in third world countries such as Nigeria. You see people who usually acquire loans and use them to buy luxury items such as cars...
...and residential houses. which is the reason why a lot of people get financially handicapped early in their career weighed down with payment of debts over the course of their lives. I& #39;ll attempt a quick definition of assets and liabilities.
Simply put, an asset is anything that generates income and a liability is anything that costs money. A liability can be an asset in certain circumstances.for instance if you have a car but the car is bringing in more money than you spend on fuel and maintenance...
...that car becomes an asset to you however when it takes away money from you it becomes a liability.the same thing with a house, a the house that you rent or buy that brings in more money than it takes away becomes an asset to you
whereas a house that you live in where you pay bills like electronic bills, water bills and other maintenance bills on is a liability to you.
