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Debt for Wealth: A Financial Coach's Insight


Leverage. I’ve heard this word used in reference to using debt “as a tool” to grow a business or to build wealth. It’s a fancy word for DEBT. What is it actually? It is going into debt and using it to acquire more “assets.”


I use the word “assets” lightly because as a friend of mine explained to me, it is like building a house of cards. For those who are Ramsey followers, recall his story of building a house of cards in real estate and having one bank call ONE note? Suddenly, his family was filing bankruptcy. Can you imagine this happening to you and your family?


When you give control of your money to someone else (i.e. the bank) it’s no telling when or how the money or asset will be there for you. Leverage, one of my husband’s favorite games from the 70s helps demonstrate this. (pictured above) As you move the weighted pieces (ie cash) across the teeter-totter board, one single move can cause the fulcrum to shift and the board (your life) to hit the table causing the person who moved the piece to lose the game. 


There are financial gurus that declare that this is the only way or the best way to build wealth. We started the laundry business with debt. Imagine all the laundry equipment and supplies required to start and run this business. In fact, the business was purchased because while playing the board game Cash Flow 101 (game designed by Robert Kiyosaki) we “won” by purchasing a coin-operated business. The game teaches “the power of leverage.” 


My husband and I worked hard to pay off over $147,000 in consumer debt between the two of us and the laundry business early in our marriage. We sold stuff. We said “no” to travel opportunities. We hosted many potlucks because we didn’t want to spend money on going out to eat. 


It may not be a matter of right vs. wrong thinking. It may be more about the degree of risk aversion. If you have children in your family or already have a financial burden, it might not pay to build the house of cards. If a gentle breeze blows one card out of place, the house of cards comes crashing down leaving you and your family in a potentially worse situation. 


So, what is the solution? First, consider that there are always more than two options. Oftentimes we get into an either/or way of thinking. For example, I can either buy a new car or not buy a new car. Think about the options in between, such as, can we repair the current car? If so, how much are we willing to put towards the repair? At what point does it make sense to buy a different car? How would we know or measure when it was the “right” time to buy a new car? Is public transportation or carpooling an option? How long can we go without a car? Can we purchase a newer car instead of a brand-new car? Sometimes we get into a mode of problem solving and we need to fix it now. This can be a Band-Aid approach when compared to the root problem. 


Here are my top FIVE recommendations if you’re tempted to use debt as a “tool” to buy assets. 


  1. Start small and create as you go, your savings, not debt. Yes, this means you might have to say no to some things. It might even mean you have to delay some of your dreams. Notice the word delay. It’s not forever. 

  2. Be patient. Paying for things with cash takes time. If you stay focused on reaching your cash goals, you WILL reach them.  

  3. Build on what you have and know. Consider how you can continue to grow without taking on more debt. What information do you need? Who do you need to help you fix things or take care of issues as they arise?

  4. Do your research. Talk with people in your circles or profession about what you’re considering. Understand the numbers and risk. 

  5. Talk to your accountability partner or others who are working towards similar goals. You don’t have to make these decisions alone. If you don’t have an accountability partner, reach out to me. 



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