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Debt is not the problem

I found this interesting article written by Robert Kiyosaki, the author of “Rich Dad Poor Dad” in which he says debt is no the problem, it’s what you do with it.

I agree almost 100%. Here is his example. “My banker is my best partner,” my rich dad used to say. “He loans me 90 percent of the money and I control 100 percent of the property, 100 percent of the profits, and 100 percent of the tax breaks. All I have to do is find great investments he wants to be a partner in.”
Very true.

He goes on to say, “Between 1995 and 2005, savers — people who saved money in bank accounts or in mutual funds — were the big losers. They lost because the stock market crashed. Between 1995 and 2005, many of the debtors who took advantage of low interest rates to invest in real estate made fortunes in the biggest real estate boom in the history of the world.

Understanding how to use debt to increase their fortunes is another reason the rich get richer. “
Again I agree.

However, most Americans are not like Mr. Kiyosaki. He uses debt to by assets that normally appreciate. Most Americans buy things that only depreciate.

He also sites a booming time in Real Estate. What happens when you are leveraged to the hilt in hopes the real estate market will go up but it takes a nose dive? Much like it did in the 80‘s, you will be in bankruptcy court faster than you know it.

Debt can be used to obtain wealth but in my mind the faster you can pay off the debt the better.

This entry was posted on Wednesday, May 24th, 2006 at 1:31 pm and is filed under General News . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.