One simple fact is true of wealth.  It is incredibly difficult to achieve without using OPM (Other People’s Money) and as such a wealthy person is comfortable with being in debt.

Debt allows you to increase the value of your wealth because the banks and other lenders allow you to borrow money to buy assets.

For example, if you had $100,000 cash. . .

The banks would lend you, say, an additional $70,000 to buy shares. Thus allowing you to buy $170,000 worth of shares.  This type of debt is commonly known as Margin lending.

or

The banks would lend you, say, $400,000 to buy a property worth $500,000.

You will find a number of articles on our website that deal with debt, such as:

• How to pay off debt quickly
• How to borrow money effectively to buy properties
• Dirty tricks in financing

We are also aware that becoming familiar and comfortable with debt is a complete change in the way most people think about being in debt.  It is this comfort with debt that allows you to take further steps along the journey of wealth.

Furthermore, it is not uncommon for successful investors to use debt to fund their day to day lifestyles.  This is sometimes known as “Living Off Equity” as you increase your debt each year to live the lifestyle you want from the increase in your assets.

This is not for everyone, and you should seek specific financial advice on how this would work for you before committing to such a strategy.

We are comfortable with such a strategy and have even designed practical tools to demonstrate how it could work for you.

Finally, debt is a tool, and, like all tools if it is used properly it makes life easier, not harder.  If used improperly though it can be disastrous!

Be careful, and enjoy the benefits.