Why Rich People LOVE Debt (This Will Open Your Eyes)
Video Transcript
Welcome to Big Money Investing
Your Ultimate Destination for Learning From Big Money and How You Can Succeed Too!
Are you ready to take it to the next level?
Investing into sound investments like big money does. Subscribe to the Big Money Investing Channel
rich people absolutely love debt while many poor people are doing their best to pay off their debt as soon as possible the rich are finding ways to increase their debt load poor people struggle to understand this concept why would anyone want debt in the interest that comes along with it rich people use debt in different ways see why many of the most successful people prefer being neck deep in debt having mortgages car loans and many other forms of payments instead of living a debt-free lifestyle with no monthly obligations this will open your eyes my name is Chris and I help teach people about money personal finance and investing if you want to become financially free and not have to worry about money make sure to subscribe to the channel and like the video if you find it helpful most of us have heard that there are two types of debt good debt and bad debt bad debt is money borrowed for liabilities or things that are costing you money every month and are going down in value a car loan is generally considered bad debt because more often than not a consumer borrowed money to purchase a depreciating asset that costs them money every month in order to make the payments they need to go to work to earn money alternatively good debt is money used to generate more income a common example of this is a mortgage for a rental property or a loan for a business that will bring in more money than the debt is costing the monthly payments are covered by the income the asset generates and then some a real estate investor doesn’t mind paying five percent six percent or even 10 percent interest on money borrowed because they know it will allow them to make much more than that a real estate professional might have a mortgage at seven percent or so but in turn they could potentially be earning a 15 or 30 percent return on their investment or the money they personally put into the deal let’s say a restaurant manager wants to start a new Venture and open a restaurant unsurprisingly doing so is extremely expensive between the money required to rent or buy a space to put it the funds needed for the equipment Furniture food insurance and hiring staff that’s a lot for someone to save up so they’re left with a choice they can wait decades until they finally have the money to get started as they try to save money faster than the rate of inflation or they can take out a business loan and begin much sooner yes they’re going to have to pay interest in the money but if they’re profiting it’s worth it the amount paid in interest for debts can often reduce the amount you owe in taxes interest paid on mortgages student loans and business loans can be deducted effectively reducing your taxable income for the year for example if someone has a total income of one hundred thousand dollars and they paid ten thousand dollars in tax deductible interest their taxable income is now ninety thousand dollars this does not save them ten thousand dollars in taxes instead of paying tax on the one hundred thousand dollar income they’re paying tax on the ninety thousand dollar income they don’t go into debt just for the sake of writing off the interest on their taxes but it’s one added benefit by using less of your own money in more of the banks you have the ability to scale much quicker than would otherwise be possible in a loose example say someone has one hundred thousand dollars to invest in rental property they can either pay cash for a single property worth one hundred thousand dollars or they can put twenty percent down on five separate properties worth one hundred thousand dollars each and finance the rest paying cash for one property is clearly the safer route but it might take a very long time to save up the cash for the next place even when considering the extra cash flow they’d receive by owning it free and clear by using the bank’s money the investor could leverage their cash and begin seeing the appreciation across five separate properties not to mention the tax benefits and the fact that their mortgage balance will be reduced each year this ability to scale also applies to other business owners the biggest component to using other people’s money is the higher level of risk that comes with it borrowing money means you could potentially run into issues and have trouble paying those debts then what default on the loans and lose your assets on the other hand leverage can allow you to earn exponential returns far surpassing what a debt-free person would typically earn higher risk means higher reward when you leverage money your investment returns are Amplified whether they be negative or positive when things go well they go very well and when things go poorly they go very poorly this isn’t a surprise to rich people they understand that using debt means they’re at a greater risk of losing money but they’re generally very good at balancing risk and reward they don’t recklessly borrow money for businesses and Investments that have a high chance of failure they’re very careful and one way they minimize their risk is by purchasing at a discount Dave Ramsey’s teachings can work extremely well for the average person who wants to build long-term wealth and keep it there’s little to no risk of losing at all when following his strategies but that comes with a major downside and that’s that it takes a very long time to make large Financial strides in fact it could take a lifetime to accumulate a million dollar portfolio by following his rules Dave Ramsey has some ideas that everyone should Implement such as live on lesson you make that’s a basic Financial principle that everyone should practice in order to succeed but many of the rich do not blindly follow all of his advice rich people look at his advice and wonder why would I pay off debt at a low interest rate when I can consistently earn much more than the interest it’s costing why would I pay cash for a car when I can Finance it at four percent and leave the money invested it takes money to make money is a phrase you’ve most likely heard before and there’s quite a bit of truth to this it’s much easier for rich people to get richer because they have access to Capital having access to debt provides rich people with the flexibility of having a pile of cash without some of the downsides such as seeing its value eroded due to inflation by sitting stationary in a savings account they love having lines of credit and the ability to borrow money if they want to because it means they can jump on an opportunity if it presents itself many times borrowing money is preferential because it means they don’t need to move cash around and sell assets in order to make a purchase selling assets on short notice when an opportunity arises can result in selling at a loss or it could cause negative tax implications people with a ton of debt love High inflation because the value of their debt is basically reduced over time inflation allows borrowers to pay lenders back with money worth less than it was when it was originally borrowed over the past few years many people chose to borrow money because interest rates were so low borrowing money was almost free when you’re borrowing money at three percent interest and inflation is eight percent or so the value of debt is eroded on the surface it seems that borrowing money is extremely expensive over time in the interest paid on a 30-year mortgage or a six-year car loan is exorbitant it does seem that way but if you adjust for inflation borrowing money isn’t nearly as expensive as it seems with many types of loans the balance is paid down with each payment you make every month the balance becomes lower and lower until eventually it’s paid in full even though that’s not usually the goal rich people see principal pay down as an added benefit of borrowing money and in most cases it’s seen as icing on the cake at the beginning of most loans like a home mortgage the principal is hardly reduced because the large majority of the monthly payments is interest the payoff slowly begins to accelerate but it’s just an added benefit most of the time principal paydown is a bonus but it doesn’t have anywhere near the benefit one would receive from inflation shrinking the size of the debt and the ability to use Leverage using debt is a double-edged sword and those who aren’t emotionally equipped to utilize it are better off staying debt free and using the Dave Ramsey strategy it’s hard to go wrong with the principles he teaches but rich people absolutely love debt for the reasons mentioned there are many benefits to using debt and when done strategically it can allow you to build wealth very quickly remember the reasons the most successful people love borrowing money and use this information to help make better decisions for your situationWelcome to Big Money Investing – Your Ultimate Destination for In The Money Facts!
🌴 Discover the Big Money Investing Strategies on Metals and Real Estate Investing. 🌊
Experience the world of finance with Big Money Investing. We bring you the latest and greatest from Big Money Investors, showcasing the whys, how-to’s, and best practices. Whether you’re planning a short—or long-term investment, preparing is the first and most important step. The Big Money Investing channel is a great go-to investment advice source
🔥 What You Can Expect:
- Exclusive Financial and Big Money Investing How-To’s
- Big Money Financial Traits: Learn how to mix and match your perfect investment portfolio to match the planned-out time horizons.
- Financial Learning Is A Lifestyle Change: Stay financially fabulous with our expert investing tips, real estate practices, and healthy lifestyle advice.
- Behind-the-Scenes: Get a sneak peek into how the Big Money Investors spend some of that return, from photoshoots to interviews with the experts.
👙 Why Subscribe to Big Money Investing?
- Stay Updated: Be the first to know about new investment ideas and most importantly what not to be part of in today’s age.
- Inspired Goals Lend Motivation: Get inspired by our Big Money Investors’ vibrant and diverse lifestyles, a perfect view at times.
- Engaging Community: Join a community of financial enthusiasts and wealth producers who love to share their passion for life with others.
🔔 Subscribe Now: Hit the subscribe button and turn on notifications so you never miss an update from Big Money Investing. Join us on this fabulous journey and transform your financial situation with the latest trends and tips from Big Money Investing. Thank you for being a part of our amazing community.
#BigMoneyInvesting #big #money #investing #lifestyle #investors
Support Big Money Investing Sponsors
-
Book Sets, Books, How Big Money Investors Think About Money, How To Think Like A Big Money Millionaire
Big Money Financial Investment Management Book Set
$85.44 – $177.66Select options This product has multiple variants. The options may be chosen on the product pageQuick View -
Books, How To Think Like A Big Money Millionaire, Top Level Communication Skills
How to Talk to Anyone by Leil Lowndes 92 Little Tricks for Big Success in Relationships
Original price was: $18.24.$12.89Current price is: $12.89.Select options This product has multiple variants. The options may be chosen on the product pageQuick View -
Books, How To Think Like A Big Money Millionaire
Poor Economics By Abhijit V.Banerjee
Original price was: $18.09.$12.14Current price is: $12.14. -
Book Sets, Books, How Big Money Investors Think About Money, How To Think Like A Big Money Millionaire, Spiritual, Wealth Creation
7 Book Set – Master Your Time – Master Your Beliefs – Master Your Destiny – Master Your Thinking – Master Your Emotions – Master Your Motivation – Master Your Focus By Thibaut Meurisse
Original price was: $93.43.$67.33Current price is: $67.33.
Leave a Reply