How to Change Debt Into Wealth

Many people go through life earning a decent living and providing for their dependents, but they have little to show for their efforts once their working life is over. If they had only learned how refashion their priorities by changing debt into wealth---or assets---at a young age, they would be able to retire and do the many things they've dreamed about but have not had time to do. The difference between debt management and wealth management requires discipline and a plan.

Instructions

1

Spend less and save more. Start by looking at the ways you spend your money in relation to your income. This can be accomplished by analyzing your total income and your expenses for at least a month. Your goal should be to eliminate the unnecessary expenses, thereby putting more money away for either investments or simply earning interest. Then, once you have established a new pattern of spending, budget an amount that you plan on putting away. To keep yourself honest, transfer that amount to savings BEFORE you begin paying your bills.

2

Pay as much as you can with your credit cards that offer you a grace period when they charge no interest. Then pay off the balance before the cards begins charging you interest. The theory is that it's better to use someone else's money instead of using your own. That's assuming, of course, that you have the discipline to pay off your credit cards and not leave a balance.

3

Increase your credit rating. Each time you use your credit card or pay your credit card bill, that information is passed on to the three credit bureaus and it becomes part of your credit history. That history is used to give you a credit score. Then, every time you borrow money, a lender will use that score to raise or lower your interest rate. The higher your credit score, the lower interest rate you'll probably pay. But that's not the only reason to raise your credit score. You will be able to borrow more money, or raise your credit limit so you can use more of the creditor's money than your own.

4

Use tax-advantaged 401(k) at work or open an Individual Retirement Account and make regular deposits to them. Many accumulate money tax-free until you are at least 59-and-a-half, when you can begin withdrawing the funds, presumably at a lower tax rate.