Jellyman Investing - Personal Finance for Australians
If you're an Aussie (A.k.a Australian) and looking to get control of your debt, or maybe learn about investing in the stock market, possibly real estate investing, then you've come to the right place. My name is Jed Guinto and this is Jellyman Investing!!
The origins of this podcast name will be explained in due course! Many years ago, I was broke and deep in 5-figure debt. I didn't know anything about finances, didn't know how credit cards worked, had no savings and the thought of one day buying my own property was just wishful thinking.
Maybe you're going through some of this. Fast forward 5 years and everything has changed. No more debt, no more credit cards, 5 figures investments in the stock market, I have my own property and a passive income. All in 5 years. Is this something you'd like to achieve?
My goal to teach you how to get control of your finances, teach you secrets and techniques we've personally used to take our lives back from Banks and institutions charging us exorbitant fees, real estate agents using fancy jargon to confuse you and finally, social media pressuring you to make financial decisions you don't understand. Welcome, to Jellyman Investing!
Jellyman Investing - Personal Finance for Australians
S01_E08 - Good Debt and Bad Debt
https://www.patreon.com/Jellyman_Investing
Is fire a good thing? It can devastate forests, destroy houses or it can cook food and provide heat. In short the answer is, depends who's controlling the fire.
Before I get on with this episode, a reminder that I have a Patreon page where you can read articles, download spreadsheets, get internet resources, watch tutorial videos and even chat with me. It's free to join so sign up today. The link is:
Patreon.com/Jellyman_Investing
Also, a disclaimer, that I am not a financial advisor, please consult with a professional before making any financial decisions. On with the episode.
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Many Real Estate 'gurus' on platforms like YouTube and TikTok praise the concept of 'good debt.' This is reminiscent of a World War II story where engineers wrongly focused on reinforcing parts of returning fighter planes instead of considering the ones that didn't return. This analogy is vital for understanding the risks of good debt in real estate investing.
Good debt involves borrowing money, usually for real estate, with the aim of wealth accumulation. It seems straightforward: take a loan, buy property, wait for equity growth, and profit. However, this simplistic view often leads to underestimating the risks.
Consider those who aggressively invest in property, like a woman I knew who used credit and loans to increase her home's value. This strategy worked until the 2008 financial crisis, which eroded much of her home's value. This illustrates that equity, though valuable on paper, isn't accessible wealth until the asset is sold. Many, planning to retire in their homes, will never realize this equity.
The term 'equity rich, cash poor' describes those with valuable assets but little liquid wealth. Real estate and leverage aren't inherently bad, akin to fire that can cook food or burn forests. However, debt increases risk. The more you borrow, the higher the interest and the greater the financial burden if things go awry.
The key to using leverage is caution. Avoid over-borrowing, start small, build a buffer, and don't hastily compare your progress to others. Opting for modest living with financial security is preferable to a lavish lifestyle with constant financial worries.
