What NOT To Do With Extra Equity!
Monday Sep 27th, 2021
One of the essential uses of equity is to invest in real estate. Most people use their equity casually and end up with either no financial means or an extra load of loans. Here are five ways that you need to avoid doing with your extra equity.
Just how one drop of water makes a river, one dollar either makes you rich or poor. Although spending on a few luxuries or dine-outs may seem like a “small expense,” they add up to a large amount. Before you know it, you have spent a few dollars every day, and it has added up to losing your extra equity.
There will come a stage where you would want money to work for you. For this, good thought of planning is essential. With extra equity, invest early in the markets or into income-inducing programs. Investments take time to grow, and they involve risk. A monthly contribution to retirement accounts can promise you a lifetime of comfort.
Do not Spend too Much on your House.
Most extra equity is spent on buying a house. However, a house is a necessity and should not be converted into luxury. Spending all your equity on a luxurious house with expensive tax, utilities, and maintenance only means a higher expenditure and no immediate ROI.
Going on a Vacation
Another no-no of using your extra equity is spending it on a luxurious trip. Make sure your extra equity is not wasted on vacation in such a manner that a stretch follows it in your monthly budget.
Irrational Technological Expenditure
Another waste of extra equity is on technological devices. From the latest phones to the latest watch, people would want to invest their money in anything in trend regardless of the long-term financial crises it would cause them. Spending your extra equity on such products only means an expenditure with little to no returns. Such expenditures only require further expenditure, and there’s no safe side. And continuing this, little by little, they will eat up your extra equity.
Why Is Extra Equity Financing Planning Important?
- Extra hand on the funding: with extra equity, most investors willingly provide additional funding looking at the growth.
- Helps eliminate debt: with extra equity financing, you cancel out the burden of debt. Especially for small start-up businesses, there’s no debt burden, unlike debt financing.
- Growth of personal contact and experience: You are more likely to attract better investors with extra equity. These investors bring in experience, skills, abilities, and contacts. This likewise helps you grow.
Learn the difference between being able to afford a payment and being able to afford a thing. These aren’t the same; payment affordability could be through different means such as debt, whereas service or product affordability means having enough finances. Monitor your actions, save your extra equity for better investment options.