How the Wealthy Use Debt to Build Wealth (and How You Can Too)
When I was growing up, I was told the same story you probably were: debt is evil. My dad was a great example of that philosophy. He paid off his home in 18 years, paid cash for cars, and lived by that Depression-era mindset that debt should be avoided at all costs. For years, I believed the same thing until I realized that avoiding debt wasn’t helping me create wealth. It was actually keeping me stuck.
So let’s talk about the truth: debt isn’t inherently bad. Used poorly, it can wreck your finances. But when used wisely, debt can become one of the most powerful tools to accelerate financial freedom.
Why Most People Fear Debt
The fear of debt largely comes from trauma. During the Great Depression, banks could call loans due even when payments were current. Imagine if you had a $500,000 mortgage today and your bank demanded you pay it all back tomorrow. That was reality back then and it scarred generations into believing all debt was dangerous.
Even financial gurus like Dave Ramsey reinforce this mindset. But his fear came from a traumatic experience in his 20s, when aggressive real estate loans collapsed on him. His story isn’t the universal rule it’s an example of how using debt unwisely can backfire.
How the Wealthy Use Debt Differently
Here’s the truth: wealthy people don’t avoid debt they leverage it. Elon Musk uses loans against his Tesla stock to cover living expenses so he avoids massive income taxes. Apple has carried billions in debt while sitting on even more cash because debt allows them flexibility. Banks themselves thrive on debt, multiplying every dollar deposited into ten or more in loans.
The difference?
They’re not using debt to buy things that lose value. They use debt to acquire income-producing assets real estate, businesses, or other cash-flowing investments. Debt becomes a tool for leverage, amplifying returns far beyond what savings alone could accomplish.
Good Debt vs. Bad Debt
So where’s the line? It all comes down to stewardship.
- Bad debt is when spenders borrow for things that don’t generate income cars, vacations, or gadgets.
- Good debt is when wise stewards use loans to buy assets that generate cash flow and grow in value.
For example, my friend Sam Prim openly shares that he holds over $30 million in debt but it allows him to control $50 million in real estate. His tenants pay down those loans while his properties appreciate, making him millions in the process. On paper, he has “debt,” but in reality, he has equity, cash flow, and freedom.
How to Use Debt Wisely
The key question is: Will this loan make me more than it costs me?
- A mortgage on a cash-flowing rental property? That can be good debt.
- A line of credit to invest in your business with a clear return? Good debt.
- A credit card maxed out on lifestyle spending? Bad debt.
The wealthy understand the principle of velocity of money always keeping dollars in motion, always making them work harder. Debt, when managed wisely, is a way to accelerate that velocity.
Final Thoughts
Debt is neither good nor evil it’s neutral. It’s a tool, and like any tool, it can either build or destroy depending on the hands that wield it. If you think like a wise steward, debt can be the very thing that helps you achieve financial independence faster than you ever imagined.
So don’t buy into the fear. Don’t blindly follow scarcity-driven advice.
Ask yourself: If I use this debt, will it increase my cash flow and my wealth? If the answer is yes, you’re thinking like the wealthy.