Many people today believe in order to become wealthy they either have to be born into wealth or have a lot of money to make money. The fact is this just isnt true. Building wealth is a mechanical process and because its so simple its quite boring, therefore many people do not follow through with the formula.

The Problem

Too many people fall into a financial rut and it usually starts when we begin moving money from one credit card to another. Sure this works for a short while, but eventually it catches up with you and before you know it you have $5000 maxed out on your VISA card and $3000 maxed out on your Discover card.

The next genius move I consider was debt consolidation. While this does work and the phone calls will stop, its not a solution for the problem at hand. Your monthly payments become lower and this provides the temptation to go out and accumulate even more debt, eventually taking you back to square one. Not to mention having a history with debt consolidation leads to higher rates on things that count later in life.

Back at square one, the next step I considered was debt counseling and the idea sounded great, they even promised to lower my monthly payments by $300. I managed to avoid this one all together and now that I look back I am glad that I did. What I later found out is that debt counseling is viewed as bankruptcy.

By this time I decided to refinance my home with an equity line/2nd Mortgage loan on my home to get out of debt and it worked perfectly. However, let me tell you a little secret. When you take out a 120k loan on a home that is only worth 90k and the neighborhood starts going downhill like ours did, you cannot sell your home for what its worth. Again, we were stuck in rut where we had to borrow money from family to sell our home. Other home owners in the area were not as fortunate.

At this point in time I was seriously considering bankruptcy. If you think that after seven years nobody will know about your bankruptcy, you are mistaken. In some cases jobs wont even higher you if you ever had a bankruptcy. Most loan applications ask if you have ever filed for bankruptcy and they do take that into account even if it has been 10 years since you filed for bankruptcy. This is when I became desperate and finally cracked the money making formula.

The Solution

In 2005 I made a new years resolution to stop spending money on things that required me to make a monthly payment. Instead, I would take my paycheck and spend it on assets, or things that put money into my pocket month after month. I like to call these assets investment vehicles. It does not matter which types of investments you choose, just as long as they are all leading to the same place financially.