I Was Afraid To Use Credit, Until I Learned THIS

What if I told you the most unethical sounding piece of money advice you'll ever hear is exactly what the wealthy quietly live by? Never pay off your debt. Carry it forever and on purpose. Now, if that makes your stomach turn, I get it. You were raised to think debt is evil. Ramsey told you, your parents told you, the church told you. They were wrong. Not because they were lying, but because they were teaching you a rulebook built for someone who works for a paycheck. The wealthy, they play by a different rulebook altogether. At the center of that rulebook is debt. Debt used as a tool, not a sin. Now, by the end of this video, you won't be able to look at a mortgage, a car loan, or a line of credit the same way ever again. Let's go. I think the reason why people are so afraid of debt is because it creates an obligation that they have to continue to pay. And if I have this obligation that I have to continue to pay, then I'm sort of stuck. I always have to be earning income, which typically people equate to earning. To pay for that. But I think the reason why it's misleading is even if I were to say pay my home off 100%, so I paid my, my home loan off, I'm still required to make monthly payments either way. I still have property taxes. I still have maintenance. I still have electricity bills, all of those things. And so while I may eliminate one of, let's say, 5 monthly bills, 5 monthly obligations to live in my house, I've only gotten rid of one. I still have the other 4. So the question isn't really, should I have an obligation to pay? Because you're going to have them either way. The question is, how do I just have the income to make all 5 of those obligations instead of 4? Now, some might be influenced by their church, maybe telling them that debt is evil, but I don't think that's, that's what the Bible says at all. It says that a warning is that the borrower is servant to the lender, meaning that the borrower has taken on an obligation and they are required to fulfill that obligation. But it's more of a warning principle like, hey, just know that you're committing yourself and you will be obligated to pay that back. It's not that it's a sin. It's not that it's dangerous. It's that just know what you're getting into. The Bible also says that a wise man always counts the costs. So before you do anything, you do it with intention. Understand what you're getting yourself into, count the cost of what you're doing, and know that if I take that debt obligation on, I'm required to pay that back. Not that it's a sin, not that there's a moral problem with it specifically. I think the big epiphany moment for using debt is realizing how the monetary system has changed over time. And so a lot of times you might hear people talk about how, well, what's the dollar backed by? Or the dollar's backed by gold, or the dollar used to be backed by gold. And it was. And so for all of millennia, the monetary system, the money system, the way that we used money and built wealth was based off of an equity-based system or gold. In 1971, everything changed. It was about 50 years ago, which is why most people haven't figured this out yet. The world changed from an equity-based system to a debt-based monetary system. And what that means is that now, as of about 50 years ago, money is created through debt issuance. It wasn't always that way. Debt was considered bad. We didn't need to use debt. But today, because debt is what creates money itself, then if you want money and you want to build wealth, then you must do it with debt. Now, the reason why a lot of people have a problem with debt is because debt is what we would consider leverage. And leverage can be dangerous. Leverage or debt can swing both ways like a knife. So what does that mean? So it is certainly the best way, the fastest way to build wealth. But if I don't use it correctly, it can also destroy my wealth. I like to think of it like fire, where fire is, is absolutely needed to cook my food and warm my house. But if I don't manage that fire properly, it could burn my entire house down. Now that's why we don't let kids play with fire. It's dangerous. They don't know how to play with it. We hope that as they become adults, they learn how to use fire responsibly and debt is the same way. And so in my younger years, in the early part of my career, all I had never known was a bull market. And I used a lot of debt to build a lot of wealth. And I was in the real estate industry and I was piling on debt and I was building my wealth as fast as I could with, with maximum leverage. But because I wasn't quite mature enough to understand how to use that tool properly, I got myself into some dangerous situations and I didn't understand 4 ways to protect myself with liquidity. I didn't understand how to categorize assets into 4 different buckets. There was a lot of ways I didn't understand how to de-risk or mitigate the risk of using the debt. And it got me into trouble when 2008 came in, the great financial crash that brought down markets, all of that debt, all that leverage, it burned my house down. What happened is after that, I was suffering from PTSD. I was afraid to use debt again. I thought debt was the problem. I should never use it again. And so while I got my income back up, I was paying cash for everything. I didn't want to get myself back into that same situation that I was in before. But after years of making 7 figures or more per year, I realized I'm not really building any wealth. And I wasn't building any wealth because I wasn't using credit to buy multifamily properties or real estate or, or things like that. And so the income was not enough for me to get there. So I had to take another look at it and realize it wasn't the fire that burned my house down. It was my failure to use the fire properly. It was my failure to understand ways to mitigate the risk of using the fire. So rather than just eat raw meat for the rest of my life, I learned how to use the fire properly. I learned how to use the credit properly. And once I learned that, I've built wealth about 5 times faster in the last 10 years than I have in in the previous two decades before that. A lot of using debt also comes down to the mindset because people don't know how to mitigate against the risk of using debt, but they also don't understand the mindset of debt. So the poor and the middle class mindset thinks they're using debt, or the reason why they use debt is to increase their lifestyle. It's to pay for things they can't afford. And because they're using credit or debt to buy things they can't afford, they're always worried about, can I make the payment? The wealthy don't use credit that way. The wealthy use credit a different way. The wealthy have the money. They could pay cash. But the reason why they use credit is because it's cheaper to use someone else's money than it is their own. Let me give an example of what I mean. Now, my daughter, she just turned 17. She's been driving for about a year now. I bought her a car about a year ago and I got her this new Bronco. She wanted to get this Ford Bronco. So we went to the dealer and sometimes my old habits are still there and we went to the dealer and I just thought, you know what, we'll probably pay cash for the car. You know, I can just afford to do that. But as I start talking to the dealer, he's like, well, we're giving rebates right now and Ford's offering to buy it down and We can get you a 6-year, 5, 6-year loan at 4.9% interest. Do you want to take that? Well, let's see. So they'll give me money at 4.9%, or I could pay cash. But if I pay cash, then I'm losing the opportunity of what I could do with that money. So the question then really becomes, is it cheaper to use my money or the bank's money? If I believe I could make a better return than 4.9% with my money, then of course it's cheaper to use the bank's money. So all I have to do is find a way to make more than 4.9% with my own money. I could buy US Treasuries. I could put in a money market account. I could buy a yield product like Stretch. Of course, I could buy Bitcoin. I could do any of those things and outperform the 4.9%. So of course, we take the debt and we reinvest the money. Now, this is counterintuitive to what most people think, because again, most people think, but what if I can't afford the payments? I have the money. The money's now in an asset. If I can't afford the payments for whatever reason, risk comes, I have the money to cover the assets. But for me, it's a game of trying to understand how my money is working and performing for me. Now, the reason why most high earners stay financially stuck, it's not because they don't make enough money. It's because they're operating with a middle-class financial operating system. That's exactly why I created the Wealth Operating System. I created it to show you how the wealthy actually build, how they protect, and how they multiply their wealth using the same tools the average person was taught to avoid. Now, I highly recommend checking it out. I'm I'm going to go ahead and put a link down below if you want to go check it out. There's a lot of ways that we can think about mitigating risk when we're using debt and leverage. But I'd say the first mindset shift that we need to make, the first rule, if we have a rule of thumb about using debt, is trying to understand the difference of good debt versus bad debt. Now, this is really what separates the wealthy from the middle class and the poor. It's the mindset that they use debt with. So for example, we want to use good debt, which is productive debt, meaning I'm using debt to make money versus the poor middle class use debt to buy things they can't afford. And so what is good debt? What is productive debt? It's debt that makes me money. So for example, if I can borrow money from the bank at 5% and I can put that into an investment that makes me 10%, now I have a new asset compounding more than the cost of the debt. It's what we call a positive carry, a positive arbitrage. So I'll always want to earn more than what the cost of that debt is. The cost of the debt is what we call the hurdle rate. So if I borrow at 10%, I want to make at least 12% or 14% or 15%. If I can borrow at 5%, I want to make 6%, 7%, or 8%. What I don't want to do is use debt to go on a vacation. What I don't want to do is use debt to buy a bigger house that costs me more money. And I don't want to buy debt for a depreciating asset. So that's the difference of what I would call good debt or what we call productive debt. We're using it specifically to build wealth, not to increase our lifestyle. Now I want to clarify this because some people might say, well, Mark, the example you just gave me about the Bronco, you were using debt to buy a depreciating asset. Yes, but that's because I did that instead of using my cash. So I used my cash instead of going into the car that would lose money. If I bought the Bronco cash, $50,000, within a year it's worth like $30,000. So what I do is I take that $50,000 and I put it to work. I put it in Bitcoin, it doubles, and I use the bank's money to go into the asset. So certainly while the loan was used to buy depreciating asset, I use the same, the replacement money to buy an asset that more than makes up and starts compounding for that purchase. Now, while we want to use credit or debt to buy assets, assets that will return more than the cost of the debt. One of my very favorite ways to use credit and debt, the first step that I typically would use is I would use credit or debt to buy assets that give me tax depreciation. So I probably wouldn't use it for the highest compounding, the most convex asset. But what I would do is I would use it for an asset that gives me tax depreciation. So what happens is currently I'm making money, a good chunk of that money goes to the government in taxes. But if I use credit or debt, I can buy an asset that specifically is designed to return money for me like an asset, but also gives me tax depreciation, which means I get to keep more of the hard-earned money that I've created. So some examples might be solar, oil and gas, Bitcoin mining, real real estate, of course, there's lots of ways. As a matter of fact, I have videos breaking that down. We can link to them down below. But if I use my credit to get those tax depreciation assets first and they make me money and they compound, but then they wipe out tax debt that I would have at the same time, I'm getting a double bonus. And then my flywheel can really start spinning from there. Now, of course, debt is just one piece of the equation. If you want to see the most important video of the next piece, then you're probably going to watch this video right here, and I'll see you over there.