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Today we talk about debt and how wealthy people use it to build wealth. Debt can be a hot topic because for many debt can be detrimental to their finances but for many others debt can allow them to accomplish more than they can just by themselves.

So here are 6 ways rich people use debt to build wealth:

Business debt; may businesses use debt to help with the growth and expansion of their business allowing them to attract more money.

Leverage: Many investors use debt in their investment portfolios to boost their earnings.

Shorting: Many investors and hedge funds use this debt strategy to make money during market drops by borrowing not money but by borrowing stock to sell in the open market.

Interest Arbitrage: If an investor can borrow money at a low interest rate, instead of purchasing something with cash, it can make more sense to finance the item and invest the cash if the potential return is higher than the loan’s interest rate.
Real Estate: One of the most common ways the average person can take advantage of debt is through Real Estate. This allows you to buy and leverage an asset without actually having the cash to buy it.

Tax Avoidance: One of the most important ways rich people use debt is to avoid taxes. By borrowing money instead of selling an asset they are able to bypass capital gains tax and enjoy their wealth tax free. Then as an added bonus they can use the Step Up Basis to eliminate their debt tax free in a strategy that many call Buy, Borrow and Die.

Let me know in the comments which of these points resonated with you the most.




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