Is the Quickest Way Out of Debt, to Stay in Debt?
Ike IkoKwu talks about financial planning myths and why debt is good.
- Duration 7:21
- Date Jul 30, 2012
Ike IkoKwu talks about financial planning myths and why debt is good.
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Much better when you say it -- -- joining us.
From Thailand -- are right so there's -- difference between good debt and bad day -- take us through what and differences and what's good debt and.
Sure good debt -- anything in my books that does one of two things and even helps you enhance or increase your personal financial network.
Or it helps you with providing tax benefits usually in the form of tax deductions.
How bad debt -- the other hand there's anything that does neither the of it does nothing to try to enhance or grow your personal net worth.
And it also doesn't -- provide you with any tax benefits.
Got it and so when you have good debt that actually does both provide both tax benefits and can help you enhance your net -- it doesn't get much better than that in the wealth creation in.
I -- -- saying can you give us some examples of of what exactly where -- mortgage fallen.
Mortgage is a perfect example of good debt and any debt that's tied to a personal residence or to some type of investment property.
And isn't perfect example of good debt.
But the key to being able to really utilize this is.
Making sure that what ever you do as it relates to how you park -- money.
That it's parked in an environment -- in an asset that you have liquidity use and control of those dollars.
That it's earning a real -- return and that it can serve as collateral for you.
And so a lot of people are up in arms about the fact that mr.
Zuckerberg has a one percentage rates -- that mortgage.
But the fact of the matter is he's done such a phenomenal job of parking his assets in the right place that they serve as great collateral for the banks and minds of the banks are very comfortable given in preferential rates and that -- Right but then you could also say he can clearly just -- -- home.
Always absolutely animal bluntly -- -- -- mind and and -- -- -- I think as but probably the entire city and Manhattan column out there for that matter.
-- -- is yes mark has come to realize that the proper definition of being debt free.
Doesn't necessarily mean that we eliminate all -- got said he actually recognizes that good that can help him continue to increases in net worth.
And all of the interviewer is out there I need to know to list TU because you -- -- not about debt intimately in fact you for.
Bankruptcy didn't you.
Several years ago insanity of Chiron now -- and then some tough familiar story.
Soon we I was one of those kids who at a very early age was just passionate about and very curious about money.
So much so that -- they eight year old kid that take gifts that received from my parents and the -- under way in a makeshift bank which is -- my -- -- briefcase.
I'm sort of very young age very curious about it was very successful early on in my career and -- But then I ended up in 2001.
Be in the victim of really a lot of financial stands -- lost a lot of money in the stock markets.
Lost a lot of money in those international stands -- -- a ton of real estate in my portfolio that went so bankrupt because I was unemployed as well.
-- when you think about the financial challenges that -- face I have been through every last one of them.
Whether it's a Bernie Madoff type scandal of its losing your job whether it's having for closures and your credit report.
-- through all of those and the biggest shift for me that came.
But allowed you to go from a personal bankruptcy in 2000 -- -- achieving financial independence in 2008.
Was -- recognizing.
That for my status relative to the amount of income -- making as a six figure -- That uncommon income demands and requires on common strategies.
-- -- as a six figure -- you're actually in the top 10% of the population.
And so chances are you need to be managing and addressing your financial.
Where we're -- a lot differently than 90% of the population.
Can -- through now lakes some mom some of those financial planning myths out there one of them is paying off your home mortgage.
Provides -- with financial security can you explain how that would be and that and then give us some others.
Absolutely that's such a big myth because a lot of people want the safety of knowing that they don't have the burden of that debt.
But I'm so thankful about what's happened within our financial climate over the past.
For years because people now recognize that home values go up as well as go down -- to -- a perfect example.
Years back when we -- Hurricane Rita and Katrina a lot of people who subscribe to traditional financial planning access to eliminate the mortgage debt so you can be debt free.
We're now in a position where they had just done that but then as soon as the hurricanes hit.
Not only that housing values plummet by as much as 50%.
But for those of them who didn't have flood insurance -- are now in a position where they literally we're being wiped out.
On that investment in their home.
Compare that to somebody who realize that by keeping their house -- mortgaged and accumulating all those funds outside of the house.
In the event of something us act as catastrophic is that they would now be in a position where they had liquidity use and control of dollars.
That they could actually use to try to recover.
In the midst of that financial calamity.
What whether it's you know even in the case of disability and job loss we've seen a lot of people lose there lose their jobs and the next thing that goes as they can't make the mortgage payments.
Because they were trying to pay off that house quickly and build a lot of equity which is now vanquished.
Again it's just a matter of perspective in terms of -- -- look at things a lot differently.
And recognizing that there may be -- more efficient way to accomplishing what it is that you ultimately trying to do in the first place.
You know that's definitely a good tip and of course perspective -- on mount one but he also say here putting money in your 401K or another qualified plan saves you.
That's another big myth now I love foreign case and standpoint of them being forced retirement savings vehicle because a lot of people have have a hard time would -- and -- about their investment.
But the second major reason why people put money -- -- forward case because of all the taxes that they think that they in the city and and so often give this analogy let's assume that she came to me for -- -- loan 101000 dollars and I -- -- check and I said here here's the check.
I would expect you to ask at least two questions the first question should be -- when do you when do I need the money back.
And see what's the interest rate going to be -- -- of and if my response to you where -- you know things are really good for me right now I don't need that money anytime soon but you know what.
When I do need the money I'll come back and I'll tell you exactly how much I need and we'll figure what the interest rates should be then.
My first question to use are you gonna cash that check.
And you know the response are typically -- is absolutely not because there's too much risk there.
-- you have absolutely no idea how much men and women need or what it's gonna cost you.
Right or for a lot of people participating in their 41 -- days.
They -- in fact taking on that same risk without any knowledge as to what the government is gonna say they'll have to pay back at retirement.
In terms of what their tax rates are going to be room.
Good it's a big issue is yet again.
The big issues and you look at -- economy.
You look at the amount of debt that we have you look at Social Security Medicare -- are all indications taxes are headed up not down.
Thank you so much -- at cocoa we've got to end it there for --