Good Debt Bad Debt

From The Hoss's Mouth

The last issue of Hoss Cents Free Financial Money Magazine made it clear that The Hoss does not recommend going into debt. However, The Hoss understands that unless you are a pro athlete, or you have inherited a fortune, or maybe won the lottery it will be almost impossible for you not to borrow money at various times throughout your life.

Hoss Cents Free Financial Money Magazine Success Tip

Before you incur any debt, you must fully understand the difference between good debt and bad debt. Not unlike knowing a good horse from a bad horse.

GOOD DEBT:

• Any debt that's used to buy an asset that will increase in value over the time of the loan.

• A mortgage used for the purchase of or remodeling of a home.

• Student loan for college (the value of an education is immeasurable)

• Provides a tax benefit

BAD DEBT:

• Any debt that's used to purchase an item that depreciates overtime.

• Car loan

• Credit card debt

• Vacation loan

• Let's make it easy to understand: ALL other loans are bad debt. Period.

The worst debt of all is credit card debt. Do not use your credit card to finance the purchase of personal or household items such as clothing, shoes, food, furniture and TV. These are all bad debt, just like placing a bet on a horse running on a dirt track when that horse specializes running on a grass track; you're going to lose.

If you currently have any credit card debt, you must take the necessary steps to eliminate this debt as soon as possible. If you have more than one credit card, get rid of all but one. That credit card must be the one with the lowest interest rate.

The Hoss wants you to understand that credit cards, when used properly, can be an excellent financial tool--they can be used to establish a credit rating. Proper use means paying the balance on or before the due date. ALWAYS.

The Hoss and Mrs. Hoss have only one credit card each. Why, you may ask, do we carry a credit card at all? We find them convenient to use when purchasing a high ticket item, because it reduces the need to carry a lot of cash. We ensure any charges on these cards is paid in full before any interest is generated. An added benefit of paying credit charges on time is that you will establish an excellent credit rating.

The Hoss has made this definition of good debt and bad debt very simple because it IS very simple and can be summarized as follows:

Good Debt = Appreciating Asset

Bad Dept = Depreciating Asset

Stay on track,
The Hoss

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Debt Control

From The Hoss's Mouth

Debt control is a winning ticket. This edition of Hoss Cents Free Financial Money Magazine provides the most important financial information you will ever learn.

A famous Canadian newspaper mogul who had accumulated a vast wealth was once asked the secret of his success. His reply was that he only bought items that he could pay for with the cash he had available at the time. In other words, he did not take out loans to purchase items.

Hoss Cents Free Financial Money Magazine Success Tip

The Hoss says get out of debt and stay out. The only debt you should acquire is for an asset that will appreciate in value over time. i.e. a home.

Okay, now I am going to bore you with numbers, but believe me when I say, at the end of this you will fully realize the importance of getting out of and staying out of debt.

Example One:

You have credit card debt of $6000.00 with an interest rate of 16 percent. Assuming you do not purchase anything else on this credit card, you could pay it off in two years paying $293.78 a month, for a total pay out of just over $7050. You see where I am going with this? You just paid over $1050 to the credit card company for the pleasure of doing business with them. Do you think you could have found a better use for that $1050?

Example Two:

There is this beautiful new car you absolutely fell in love with. It costs $30,000.00. The salesman likes you so much that he is willing to give you $5,000.00 for your old heap for a trade-in. Not only that, the kindly dealership will lend you the balance at a measly 4% over four years.

Okay, now what is this car going to really cost you?

To completely pay for this car in four years you will have to come up with $564.47 per month, for a total pay out of $27,094.86. That's $2,094.86 in interest you paid to the dealership. You probably noticed The Hoss did not calculate the administration fees charged by the dealer, or the taxes on such a purchase, nor did he tell you your old heap was sold by the dealer for a lot more than the $5000.00 he gave you. Oh well, The Hoss ain't perfect.

But do you get my point?

You could have kept your old heap another four years, put $564.47 per month in the bank, and even if you don't put the money in an interest bearing savings account, after four years you would be able to pay cash for a new car AND have over $2000 for that new HDTV you've been eying at your favorite tech shop. Now that's what I call a winning daily double. As Mom would say, ain't life grand.

By now you can see the wisdom of that Canadian newspaper man and why he was so financially successful.

Stay on track,
The Hoss

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Hoss Cents Free Financial Money Magazine

The free financial money magazine by the Hoss leaves the starting gate today. It is designed for those of you who have difficulty in managing your financial affairs. The Hoss will guide you through the steps each of us should take to achieve our financial goals.

Why, you ask, should I read this financial money magazine and not others? The simple answer to that is you should not limit your reading to this magazine alone. The more information you obtain, the more likely you are to achieve the financial freedom you crave.

The Hoss will provide you with his Hoss Cents tips that contain valuable bits of information, which if followed, will assist you in reaching financial success.

Who is the Hoss? He is an ordinary Joe who retired at age 49.

He did so without the benefit of a college education. He did not inherit money. He was not a pro athlete. He did not partake in criminal activity. What he did do was work hard and make sound financial decisions.

Hoss cents financial money magazine will cover topics such as how to:

• eliminate debt
• invest wisely
• utilize credit cards
• establish and set priorities
• achieve your goals with budgets
• choose a financial institution
• select an insurance company
• purchase a home
• minimize taxes

Plus many more tips of a financial nature.

Each edition will concentrate on one topic. The first publication will explain the absolute necessity of controlling debt. Welcome to the Hoss Cents Free Financial Money Magazine.

Stay on track,
The Hoss

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