The Big Fear That Can Turn Into Wealth…
When you think of the biggest fears that people deal with, what comes to mind first? There are lots of common fears – from big things like death to tiny things like spiders.
Forget snakes, heights, and clowns, though – the big fear that almost half of adults dread is…
According to Northwestern Mutual’s Planning and Progress Study, 45% of Americans said just thinking of their debt makes them anxious… and a full 20% said it makes them physically ill at least once a month.
Whether or not your response is this extreme, it stands to reason that this fear is well-founded.
Right now, the average Baby Boomer has $28,600 in personal debt. The average Gen Xer has it even worse – they shoulder a full $36,000 in personal debt.
Credit card debt alone has reached $868 Billion in the US.
So yes, debt is very real, it can be very scary, and it’s only getting scarier.
Not so for Robert Kiyosaki, though.
I’m sure you know who he is by now, but just in case you don’t…
As you probably know by now Robert is the author of the best-selling personal finance book of all time, Rich Dad, Poor Dad. He’s a self-made millionaire, a leader in the investing community, and a repeat guest on London Real.
And when it comes to how he built his empire…
Instead Of Fearing Debt…
He says that debt is what made him wealthier than anything else.
He didn’t go run out and get student loans for a too-expensive degree, nor did he run up his Visa card on shopping sprees for things he didn’t need…
But he did use and leverage debt in order to grow his personal wealth all the same.
According to Robert, this is the difference between the poor and middle classes…
And the wealthy 1%.
As Robert wrote in an Entrepreneur article, “My wife Kim and I have hundreds of millions of dollars of debt. We pay little to nothing in taxes.”
“Debt and taxes: Those two words make most Americans feel anxious and keep many up at night. That’s because most Americans — even highly-educated people with six-figure salaries — lack basic financial knowledge about how to use debt to make money and how to avoid paying taxes – legally and ethically.”
You see, because of a lack of how the system works…
The poor and middle class use debt incorrectly, and as a result, they suffer.
The wealthy understand and leverage debt, and as a result, they get wealthier.
This might seem patently unfair – how is the Average Joe supposed to live like the wealthy and use debt to his advantage when he’s already starting out in the hole?
Forget about high finance – schools aren’t even teaching people how to balance a checkbook anymore.
It’s not unfair anymore, though. Anyone can take the time to learn how to use debt to their advantage these days…
And once you know the rules of the game, you’re no longer doomed to lose.
Once you understand what debt is and how to use it to your advantage, you can play to win just like Robert did.
Now that we’re in the information age, there are hundreds of books (like Rich Dad, Poor Dad, for starters) and thousands of videos on the topic, but here’s an introductory primer.
The first thing to know is that there’s bad debt and good debt.
Bad debt is the kind people should be afraid of. That’s things like credit card debt, student loan debt, and even car loans and mortgages on primary residences.
Most people can’t wrap their minds around that last bit because they see their cars and homes as assets, but because these things cost money and don’t make anything in return, they’re really liabilities.
This might leave you wondering…
What Is Good Debt Is Then?
Good debt is debt that will make you money in the long run. This includes things like loans for investment properties or equipment that will help you make a return with your business.
If you can accrue good debt and use it to make more money than the debt itself costs you, then not only have you made money from nothing…
You can also get a tax break on it, too. You essentially get to double dip – without paying out of pocket.
Think of it this way.
If you save up cash to put a down payment on a house to live in, you’re using post-tax dollars. Let’s say you worked really hard and you saved up $50,000. You would have paid federal and state taxes on every penny that you made, so you’re already facing an uphill battle to save that.
In contrast, if you’d borrowed the same amount of money to put a down payment on a rental property, you wouldn’t have paid any taxes on that money, AND you’d make income back on it, AND at the end of the year, you’d still get a tax break for the property taxes you paid.
Your borrowed money would pay itself back – and then some.
This is a very simple version of the strategy that Robert used to grow his wealth. He’s applied it to single family homes with great success, and then with multi-family properties (like apartment buildings) to even greater success. His gain from this strategy is in the millions – and it all started with debt.
Make no mistake – the rich have debt. They have tons of it, in fact. The difference is that their debt makes them money…
And everyone else’s debt just makes them poor.
You owe it to yourself to ascertain what kind of debt you have, and if it’s the kind of debt you don’t want, work to eliminate it.
If it’s good debt, though? That’s nothing to be afraid of. In fact, it just might make you rich, too, so stop thinking of debt as a four letter word and instead embrace it as a tool you can use.
Editor, Brian Rose Uncensored