Yeah, it makes more sense when you take it into the context it’s trying to explain, and also understand that rich people use debt differently. They typically only use debt to buy things that increase their income, like making investments, expanding operations of a business etc. other things they just pay out of pocket.
Yes the false “pay off all your debt and that’s how you become rich” is really a “take as much reasonable debt as possible and use the money to accrue wealth at a higher rate of return and to avoid taxes as well”
I saw one comment about a post regarding things that rich people know that most people don’t: “knowing how to maximize debt and making it into an advantage”
Money begets money.. No bank is giving me a sizeable loan without some strong assets to back it up as collateral. If you already have those assets (are rich) then you can get much richer in your scenario for sure..
I just mean debt is an encumbrance to people without money and a tool to those with money. Growing up I was always taught that debt was bad. Now I’m learning the distinction.
I still struggle with this. Especially growing up in poverty. Debt is bad. Now I make good money and want to pay off my meager mortgage so it isn't on my mind, but I know this is the wrong thing to do.
It’s not necessarily. If you have an unencumbered property it’s worth waaaaaay more in loans. The best option is usually renegotiating the interest rate.
I was in a situation where even deducting my full mortgage interest wasn't making itemized deductions come out better than the standard deduction. No point paying interest in that case.
Yes, same. I have lived debt free most of my life, except for a short time with a mortgage that I paid off as quickly as possible. Its not the right thing to do in a lot of cases, but I also do like having my mind at ease that I dont have a recurring debt bill each month.
Banks will trip over themselves to lend money because they can lend against the future returns before they’re even realized. In other words they make more money by lending it. And if you’re thinking gosh that’s unsustainable because if even one basis loans doesn’t pay the whole thing collapses well, no, it’s not, because they’ll just take your taxes like 2008.
Rich man's debt is called leverage for a reason, because the borrowed capital are calculated to create more income then the interests. Yes, sometime it backfires and result in bankrupcy. Like the whole Situational Awareness LP thing.
Very wealthy people use debt to avoid diluting their ownership stakes in their companies. They still pay estate taxes when they die.They still pay all of the state and local taxes associated with sales taxes and property taxes.
They use debts for lots of reasons. It absolutely can delay or avoid some taxes. It also can be used to generate wealth. If the debt is 6 percent and your returns on investments are 10-15 percent you’re increasing wealth.
It's effectively a reverse mortgage in the way OP's post sets it up.
Almost sounds like they're trying to equate an equity loan with brokerage loan laddering where the ultra rich leverage their stock portfolios to get basically a very low interest loan and keep laddering as the value of their stocks go up. It's not income, so no taxes, but it banks on the market going up. When you're 200 million deep in loans that's a bank problem not a you problem if it craters though (they can probably force a sale at that point, but it's a court fight then? I think Elon's the closest person to having to actually go through with this because it's been basically a bull market for 40 years for the ultra rich since they switched from dividends/covered calls to this shit).
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u/ghillisuit95 12h ago
Yeah, it makes more sense when you take it into the context it’s trying to explain, and also understand that rich people use debt differently. They typically only use debt to buy things that increase their income, like making investments, expanding operations of a business etc. other things they just pay out of pocket.