What Type of Debt Do Millionaires Have?

For most people, debt is their number one evil enemy. But, for self-made billionaires and millionaires, debt is a tool, and a useful one at that. They don’t definitely see it as something evil as what most people know it. This is a solid proof that millionaires think and look at things in a different way from the rest.

But if you happen to be overwhelmed by debt right now, this is a complete disaster. You need to eliminate your debt right away. You will never prosper if your debt remains. Your debt is what you call a dumb debt.

Use Debts to Be a Millionaire

It is important to know that not all debts are dumb debts. There is what you call a smart debt. Millionaires enter into smart debts all the time. This is something they do on purpose. They have actual and definite plans in mind. Self-made millionaires don’t just stumble into debts without even realizing it.

Millionaires know how to enter into debts and have carefully calculated plans to get out of debts and a specific date for doing so.

Debts of Millionaires are All About Leverage

Lever is among the earliest types of tools humans invented and this was made to amplify or magnify human strength. A man using a lever can move something heavier and larger compared to another man who just relies on brute strength alone. Many people without a lot of cash are similar to men who don’t use levers. They only have the power of the little cash they have with them.

For instance, imagine you had the chance to enter a business deal that you confidently know will make money. You can invest your existing cash, sell a home or stocks or gut your retirement portfolio. One more approach is to borrow money or get into debt, invest that money, then reap the rewards in the end.

This can be done if you purchase a house. For example, you find a property that you feel to be undervalued. You want to purchase it but its price tag is $250,000 and your cookie jar doesn’t have this much money yet. So, you invest your own $25,000 then mortgage the rest. Let’s say you are prepared to keep that house for one year or so as you make renovations where you invest another $25,000 for the upgrades. You are savvy in real estate and after a year, you put the property on the market and earn $350,000 from it. You pay off your $225,000 mortgage and the cash you spent into the house which is $25,000 plus one year worth of payments for mortgage, and your $25,000 down payment. At the end of it all, you walk away with your $57,000.

See how it works?

Self-made millionaires look at debts as a means to be a lever as they leverage a small amount of cash to do the work of lots of cash. If your debt was about purchasing clothes, vacations, or cars you couldn’t really afford, this is not a smart debt. You have to pay such debt off and stop getting into such debts in the future.