Why You’ll Never Get Rich Unless You Master Debt
How the Wealthy Turn Borrowed Money Into Massive Fortunes
Today, I want to talk about one of the most misunderstood yet essential tools for building wealth: debt. Over the past 200 years, debt has played a pivotal role in shaping economies, funding wars, and creating opportunities for individuals and nations alike. Yet, while many fear it, the rich have mastered the art of using debt as a lever to multiply their wealth. Let’s dive into the fascinating history of debt and explore why it’s not only necessary but also a powerful tool if you want to get rich.
A Brief History of Debt
Debt has been around as long as money itself. For the United States, it began with the Revolutionary War, which left the country with $75 million in debt by 1791. Over time, public debt grew as the government financed wars, infrastructure projects, and economic crises:
1835: Under President Andrew Jackson, the U.S. paid off its national debt entirely for the first and only time. But this didn’t last—by 1846, new wars and expansion projects brought debt back into play.
1860s: The Civil War caused U.S. debt to skyrocket from $65 million to $2.7 billion by 1865.
World Wars: Debt ballooned again during World War I ($22 billion) and World War II ($260 billion).
1980s: The U.S. entered a new era of borrowing, tripling its national debt within a decade to fund military buildups and social programs.
Debt is not just an American story—it’s global. Nations have borrowed to fund wars, industrial revolutions, and economic recoveries. And while defaults have occurred (Greece famously defaulted multiple times in the 19th century), borrowing has been essential for growth.
Why Debt Is Necessary for Wealth
Here’s a truth that might surprise you: you can’t get rich without understanding how to use debt effectively. While most people see debt as something to avoid, the wealthy embrace it as a tool for leverage. Why? Because debt allows you to control assets far larger than your own capital would permit.
Let me break it down with an example:
Imagine you want to buy a $1 million property. If you pay cash, you’ve tied up all your money in one asset. But if you use $200,000 as a down payment and borrow the remaining $800,000 at a low interest rate, you now control a $1 million asset while keeping $800,000 available for other investments. Over time, as the property appreciates in value (say it grows to $1.5 million), your return on investment is far greater than if you had paid cash.
This is called leverage, and it’s how the rich multiply their wealth.
How the Rich Use Debt to Build Wealth
The wealthy don’t fear debt—they wield it strategically across multiple areas: