“The more debt I have the richer I get”
It’s easy for the Irish to build wealth, because their capital is always Dublin. 😆 But the rest of us have to find others ways to grow our net worth. I recently listened to an episode of Palisade Radio, where the host, Collin Kettell, interviewed Robert Kiyosaki, an American investor and the author behind the Rich Dad Poor Dad book series. According to Robert, one way to build wealth is by using debt. Here’s a part of the interview.
“People think I am a real estate guy, but I am not. Really, I am a debt and taxes guy. You see, the more debt I have the richer I get, and the more debt I have the less taxes I pay…. The 1% does not pay tax. They are also deeply in debt, but it is good debt – debt that makes them rich.” ~ Robert K
I currently have $490,000 of debt. If Robert K. is correct then maybe I should borrow even more money so I can become financially independent sooner, haha. But in all seriousness he does bring up some interesting points. Borrowing money allows us to invest more than what we currently have in savings. This magnifies the returns or losses of our investments depending on how they perform. He also suggests that having more debt leads to lower taxes. This can also be true. For example if we buy a rental property with a 20% down payment then the interest we pay on the mortgage debt can be deducted from our salary which will lower our taxable income, which means we pay less tax. 🙂
Robert is also not a fan of the 401(k), which is similar to the company matching RRSP program in Canada. He believes it’s basically another kind of tax. For example an American worker may put $100 into a 401(k) and their employer will supposedly “give” them another $100 for free. But Robert argues that this reasoning is bullocks because it’s suppose to be the worker’s $200 in the first place because it’s part of the cost to keep someone hired. “The company isn’t doing you any favors,” he claims.