Most people fear debt. They are told to avoid loans, stay away from credit cards, and pay off everything as soon as possible. The rich, however, see debt differently. They don’t use it to buy things they can’t afford. Instead, they use it as a tool to build more wealth.
If you understand how to use debt wisely, it can work for you instead of against you. The problem is, most people only know one side of debt—the side that keeps them trapped.
The Two Kinds of Debt
Not all debt is the same. There is bad debt, which drains your money, and good debt, which helps you make more money.
- Bad Debt – This includes things like credit card balances, car loans, and personal loans used for things that don’t generate income. These debts take money out of your pocket each month without bringing anything back.
- Good Debt – This is debt used to buy assets that pay for themselves over time. The rich borrow money to invest in things like real estate, businesses, or stocks. These investments bring in income, which covers the debt payments and creates profit.
How the Rich Use Debt to Get Richer
The wealthy don’t fear debt—they control it. Here’s how they do it:
- Buying Real Estate with Other People’s Money (OPM) – Instead of saving for years to buy a property in cash, the rich take a loan to buy it now. They rent it out, use the rent to cover the mortgage, and let the property increase in value over time.
- Leveraging Business Loans – They borrow money to start or expand businesses, knowing that the business will generate income to pay back the loan while still making a profit.
- Investing with Borrowed Money – Some of the wealthiest investors use loans to buy stocks or other assets when they expect prices to rise. If done correctly, the gains from the investments outweigh the cost of borrowing.
- Using Low-Interest Debt to Pay Off High-Interest Debt – Instead of paying massive interest on credit cards, they refinance debt at lower rates and keep more of their money.
Why Most People Stay Stuck in Debt
The reason most people fear debt is that they only experience bad debt. They take loans for things that lose value—cars, expensive gadgets, vacations—and then struggle to pay them back with high interest rates.
Meanwhile, the rich use debt to buy things that bring in more money. This is why they get richer while others stay trapped in payments.
How You Can Use Debt the Smart Way
Even if you are not wealthy yet, you can start using debt like the rich:
- Stop borrowing for things that don’t make money. If it doesn’t put cash in your pocket, think twice before taking a loan.
- Use debt to buy assets, not liabilities. Invest in things that generate income, like rental properties or a side business.
- Improve your credit score. The better your credit, the lower your interest rates when borrowing for good investments.
- Look for low-interest financing. The rich get the best loan deals because they know how to negotiate and find favorable terms.
- Make debt work for you. If you use debt wisely, it should create income that pays for itself, instead of draining your paycheck.
Debt is not the enemy—the wrong use of debt is. The rich understand this, and now you do too.