🤦🏻‍♂️ Dumb Debt vs. Smart Leverage

Debt is kinda like a chainsaw. It can be a really productive tool, or it can cut your legs off.

Debt has bankrupted millions of people. It’s also made millions of people very wealthy.

That’s because there’s a BIG difference between Dumb Debt & Smart Leverage.

Most debt IS dumb debt. I agree with Dave Ramsey on this. But there’s definitely an exception.

🤔 It all comes down to how you think about “assets.”

Most people’s definition of an asset: something you can convert into cash.

This would include your car, couch, and coffeemaker. Using debt to acquire assets like this is what keeps people from ever getting ahead.

💡Wise investors’ definition of an asset: something that

1. at minimum holds its value,

2. should appreciate in value, and

3. should generate cash flow.

Using leverage to acquire this type of asset (notice, I said ACQUIRE – not a fan of continually re-levering), could be a smart decision. The best examples of this type of asset: rental property and a healthy business.

👨🏻‍🎓 What about a college or graduate degree? Worth financing?

Education can absolutely be a legit asset, but I’m extremely bearish on traditional higher ed with a few exceptions (e.g. medical profession). I think for what you get, the ROI just isn’t there a lot of the time and there’s a much higher return investing in a real-world education.

🤦🏻‍♂️ It’s honestly mind-boggling to me how easily people will go into debt for over-priced, questionable-ROI degrees, and completely pass on real-world programs that cost a fraction … and have the legitimate potential to add a 0 to their net worth + align more with the life they want to live.

(Shameless plug: tell your friend to consider Net Worth Coach before they potentially finance that MBA. 😄)

🏠 Real estate has made more millionaires than anything else.

💡And that’s enabled by “Smart Leverage.”

The average person simply can’t afford to save up for a rental property in full cash (the Dave Ramsey model). If you have that kind of earning power and can avoid using debt to build a small portfolio, that’s incredible.

It’s just not reality for most young professionals … they’re already having to really hustle to come up with down payments + necessary reserves to have an opportunity to get in the REI game.

For me, I didn’t want to wait 30 years for financial freedom, so I used “Smart Leverage” to acquire cash flowing rental properties that met my criteria for “Low Risk REI.”

📝 Please note: “Smart Leverage” starts with the way you’re defining Assets as laid out above, but it certainly doesn’t end there.

There are other factors to consider before using leverage including the terms of the loan, nature of the deal, your overall cash savings / liquidity, and other stuff we don’t have time for in this issue.

Bottom line: if you’re like me and you don’t already come from money, smart leverage is a powerful tool for acquiring the sort of assets that can bring financial freedom.

And if you’re currently carrying some “dumb debt,” don’t worry. Most people are. YOU CAN ABSOLUTELY PAY IT OFF, with the right game plan. 💪🏼

Some members in our Net Worth Coach community have paid off 100K+ in debt 🤯, freeing them up to build assets that accelerate their net worth.

In your corner,

Blake Bozarth

When you're ready, here are 3 ways I can help you:

1. ​Free Live Session: upcoming topics include The HYSH: how to choose a High Yield Side Hustle, Low Risk REI: how to build a small real estate portfolio in today’s market, and Getting a Raise: positioning for more comp in your day job. It’s a closed session with Q&A, ask me anything – submit this form to get calendar invite (usually on a Friday afternoon).

2. ​Net Worth Coach: course + group coaching program to build your net worth (for purpose-driven 20 & 30 somethings working 9-5 jobs)

3. Entrusted Mastermind: mastermind community for men earning 150K+ (in a job they may or may not want to leave one day). Faith. Family. Wealth Building.