Savers Are Losers
Good Debt VS. Bad Debt - Why I like debt
(Listen to audio version of me reading👆)
Robert Kiyosaki has always said, “savers were losers.”
This isn’t just a catchy marketing line that he has written and spoken about since 1997 when “Rich Dad, Poor Dad” was published.
Many people are still angry at him to this day for saying that.
That statement goes against the grain of their entire existence and causes confusion.
He was right in the sense that if you save dollars you are actually losing.
The other meaning was that if someone believed in the dollar and were holding it, that meant they weren’t continuing their education.
They didn’t realize that the dollar IS debt. It’s a claim check for something of value.
In 1971 the dollar was taken off the gold standard (the thing of value) so it became debt. It’s not worth the paper it’s printed on.
So, we will get paid off in cheaper dollars moving forward.
Each day is currently the most value your paper dollar will ever hold, the next day will be less, and the next, and so on.
Each day that passes the dollars in your wallet purchase less and less things.
This is not a new inflation phenomenon we are living through this past year or two. It’s been going on since 1913 since the creation of the federal reserve as we have spoken about before.
The more the Fed/Government print currency, the poorer every person holding dollars becomes.
What to do?
Knowing that my dollars will continue losing value I want to trade as many dollars as possible for hard assets or primary assets that everything else is derived from that cannot be confiscated or diluted.
I want things that will appreciate overtime as a dollars depreciate.
I want to save in gold, silver and bitcoin and I also want to get in to “good debt” (assets producing cash-flow that covers the debt payment) as those who are in debt with rental properties and mortgages on them will find that their mortgages will get paid off with cheaper and cheaper dollars over time while their mortgage stays the same amount.
Right now we have real rates that are negative meaning:
Inflation rate - interest rate = negative (you are losing purchasing power)
Example current inflation in CPI is around 8% we will say. The interest rates at the bank paying we will call 1%.
8% inflation rate - 1% interest rates = losing -7% each year if you are holding dollars/equity.
The TOP 4 Reasons I Like Good Debt:
Protection against creditors. No equity to get.
This is something that does not get talked about very often but as society decays more and more the litigiousness of it grows and grows.
If someone were to sue you, albeit still not a great chance, however it does rise when your wealth rises, I want there to be as little equity in the property as possible so that creditors and greedy attorneys cannot get their hands on it.
Unrealized capital gains.
Governments have printed so much currency that they are finding every single way possible to pay for their missteps and idiocy.
Janet Yellen about a year or so ago proposed taxing unrealized capital gains.
This would crumble the entire world economy and grind everything to a halt.
They know this however their hubris knows no bounds and I really don’t believe anything is off the table with these people.
Especially the globalists.
They have talked about global minimum business tax rate and the charade will just keep moving crazier and crazier.
An unrealized capital gains tax would mean that if you have as much debt as possible on your asset out there won’t be anything for the government to tax.
Continue stripping it equity out and using it to accumulate more assets and leverage them up so the government cannot get you anything.
It’s leverage to accumulate more assets/cashflow.
Obviously one of the great benefits of using debt is the fact that it is leverage. You can borrow from the future to buy more assets now.
Robert Kiyosaki pointed out in Rich Dad Poor Dad that the “rich don’t work for money” and that “your house is not an asset.”
What he means is that most people use their primary home as an ATM to go crazy and buy jet skis and other liabilities through refinancing and pulling out debt.
If you use your assets to go and buy more assets it may compound your wealth instead.
You have to make sure that your income and your expenses lineup and you don’t over leverage and have no way to pay your debts off.
If done correctly though you can continue accumulating assets with your existing assets’ debt.
It’s tax free.
Taking a loan out on a property or on another asset creates a debt that you have to pay back.
Because this must be paid back it is not taxed because it’s not income like a paycheck.
It’s debt.
You can then use this tax free debt to go acquire more assets leveraging up your wealth. Which refers back to the previous point.
BONUS
I predict that there may come a point when we have negative nominal rates where you actually get paid to hold debt, a la mortgage interest payments to YOU instead of the bank.
This already started happening in numerous countries in the world so it’s not like this is that big of a scratch. Talk about mind-bending...
Conclusion
This is why Robert Kiyosaki again wrote that the “rich don’t work for money.” If you spend your entire life working for a paycheck you are taxed the most.
If you work to acquire assets and build assets you can then use that to acquire more wealth tax free through passive income or at the lower tax rate of capital gains.
Stay strong,
Brandon
Ps. Remember if you are creative, you can take out loans against all your assets if you needed or felt the need to do so.
Again this is what I do and what I see. This is not financial advice but only education. Using debt requires sophistication, patience, and diligence.