Good Debt Income Ratios

Good Debt Income Ratios


Stay within good debt to income ratios, a good yardstick of your total debt repayment should never exceed than 40 % of your income. This is so you can always have positive cash flow for your wealth multiplier account. With too much debt you end up having all your earned cash servicing interest for loans.

Buying everthing cash is also going to inconvenience you sometimes, as with the example I gave you above, you would probably need to save for a lifetime before yo would be able to buy a house if you have to do it cash. Teach your children how to use the convenience of aloan, but also how to be accountable to pay it back.

It 40 % or less of your total income is spent servicing your loans and debt, it means you have 60 % to live off. You amount of capital that you can create for investment from your monthly income is going to be very minimal. This cause you to be in debt longer and keeps you in a cycle where very little  investments are made. Without adequate investment capital, you can generate only very minimal of wealth for yourself.

Borrowing only for guaranteed return investment

Borrowing money to invest in fixed return or guaranteed return assets and investments. If you borrow money at a fixed interest rate and have fixed income coming in every month as a guarantee and the money being pad to you by the investment is higher than the interest on the loan, then it is worth taking a loan.

In some countries there are feed in tariff systems for solar power, basicallt the government endeavors to raise more green or renewable energy for consumer consumption. They then begin to allow private individuals to put solar power panels on their roofs to generate and supply electricity back to the central power grid for a free. In some countries like Malaysia it can be at a fixed rate for twenty one years.

Study the quality or the product  and the systems well to know your rights before you do it. Reread section on the foundations for investment research that is covered in the chapters on investment before you invest.

There are many other deals like this thatyou can take advantage of. For example, I once invested in a low priced apartment next to arail transit station. Because it is a major transport hub, it was a highly tenantable apartement where a vacancy could easly be filled within a day, or sometimes within an hour. The rental income was constant even in a recression. Borrowing money for these types of investments are more profitable than others with returns that can vary.