How to Use Debt

Did you know that debt can be preferable to savings? The key is to use debt to invest in assets. This method can earn you more money in the long run than compounded interest because of the potential for big returns on investment and tax breaks.

Real estate, for example, is a great asset class. The U.S. government offers something called depreciation to long-term investors in real estate, which amounts to a deduction on your tax return. You can get the deduction on both your own money and the money you borrowed from the bank.

In real estate, you can also pay no tax if you sell a property and decide to invest that money in another property. But beware: these laws only apply to real estate investors, not short-term flippers.

Once you have earned your money back, start searching for other investments. When done properly, using new debt to acquire assets is effectively printing your own money. Learn more about financial freedom in our Instaread on Unfair Advantage, from the Rich Dad Poor Dad series.

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