No, Bums Are Not Richer Than You!

Trump Dubai

A couple days ago, my buddy Neil Patel made a post claiming that bums on the street are actually richer than the average American.

His rational for that conclusion came from a study that showed the average American household is $14,500 in debt. He also used a story about Donald Trump telling his daughter, Ivanka, that the bum they saw on the street was richer than him because the bum had no debt and he had tons.

I don’t know what to correct first. The post is full of so many errors and general misconceptions about financial planning that I think Neil wrote it just for linkbait. It wasn’t Ivanka who was with Donald, it was Marla. They weren’t driving, they were walking. The average American household may have $14,500 in debt but guess what? They have more than $14,500 in assets. So who’s richer?

If You Want To Become Rich, Get Into Debt!

In his post, Neil doesn’t make the distinction between good debt and bad debt. He just said pay off your debt. Let me tell you something, no one has ever gotten rich by paying off their debt. You need to know the differences between good debt and bad debt. Bad debt makes you poor, good debt makes you rich.

During the time Donald made the bum statement to Marla, his debt exceeded his assets by $800 million because of the NY real estate crash. One could say he had too much debt, but it was good debt, and he managed to restructure everything so he could service it and when the market came back, Trump was a Billionaire again. It should be noted that during the restructuring, Trump was limited to spending “only” $300,000 per month on personal living expenses. Ya, the bum was way richer than him!

There isn’t a single person on the Forbes 400 list that got there without using a ton of debt. The key is, they used good debt and avoided the bad debt. I would never run a credit card balance. That’s bad debt. However, I would have no problems going heavily into debt to buy an income producing asset. It’s really simple math.

Say you purchased a house for $500,000 and you used cash because Neil said debt was bad. If the house goes up by 10% in a year (not likely in this market but this is just an example), you’ll make $50,000 for a 10% return. However, if you put that $500,000 as a down payment on a $5 million property and it goes up 10%, your return becomes 100%. That is the power of good debt and how it can make you rich. This is what Trump does. If possible, he would try to set up the deal so he doesn’t have to put in any of his own money. Then his return is infinite.

The Mindset of The Rich

Neil got it right when he said you needed to change your mindset if you want to get rich. But his advice on paying off debt is really the mindset of the poor, not the rich. They say successful people think differently than unsuccessful people. That’s not true at all. They don’t think differently, they think opposite.

An unsuccessful person hates failure. A successful person welcomes failure because he knows failure is a requirement for success. An unsuccessful person works hard for money. A successful person has money work hard for him. An unsuccessful person takes. A successful person gives. An unsuccessful person think a job is safe and investments are risky. A successful person thinks a job is risky and investments are safe. An unsuccessful person hates debt. A successful person loves debt. The list goes on, but the point is a successful person has an opposite attitude from an unsuccessful one.

If you want to be successful, the first thing you need to change is your attitude. If you have the attitude of an unsuccessful person, then no amount of reading, couching or training is going to make your successful. Once you change your attitude, things will open up for you.

Whatever you do, don’t have the mindset of a bum. Even if your debt is greater than your asset, you’re still way richer than him. Just ask Donald. 😈

115 thoughts on “No, Bums Are Not Richer Than You!”

  1. John, your right on the buck here.

    I didn’t even get more then a couple paragraphs into this article until I realized the same thing you say.

    That article writer don’t know the difference between good debt and bad debt. I have no problem with going and taking a big loan as long as it is a loan that funds an investment that is paying me more then what the loan costs me a month.

    Thats a good debt

    I am no expert though being roughly 29 000usd in debt myself but I have learned the hard way just what it means to be the slave of bad debt.

    What I could have done with for my bank payments every month:

    * Buy a new ipod every month
    * Buy a nice plasma tv every quarter
    * Afford to dine out once every weekend
    * Be able to Travel once a year

    Note: Those things are things by them self not combined *Doh*

    One thing after starting to educate myself about how “money works” and becoming financially street smart is that why didn’t I get taught this stuff in school?

    A financial education is a must in todays society…

    -Tobias Fransson

    1. Israel says:

      Smells like linkbait to me…

      1. This entire post is a direct rip from the ideas contained in RichDad PoorDad.

        Any chance you could be original John?

        1. Hey Contamination,
          I think you don’t know that all eople here are tue fans of John. Especially me who takes John as the real blogging GURU. So you better not tell anything negative for John. This is a superb post and hats off to John.


        2. Robert says:

          It may contain the same premise as Rich Dad, Poor Dad but there are still people who read it and came away not understanding a world.

          I think John got the information and made it his own.

    2. Yea, I think so too.

      Someone would do a complete b/s post, somehow relates it to the real world, and it get them tons of traffic… booooooo…..

      1. Why would you want to buy a iPod every month unless you work for Apple?

        1. Tushar says:

          1) I don’t think even Apple workers would want to.

          2) I think he was using it a metaphor, to show you just how much he was losing.

        2. The example was reffering to his level of debt, and what he could of done with the debt.

  2. Derek says:

    You are absolutely right. There is a such a thing between good debt and bad debt. However, with all debt comes risk so you need to make sure you hedge your tolerance for risk.

    Now, if you look at someone like Donald Trump, his tolerance for risk is much higher than most people. At any given time, I wouldn’t be surprised if he has it all on the line and look how successful he is.

    Here is a great question to ask yourself. If a man came up to you and said, “If you put everything you own – your house, your job, your car, and anything else you have of value – on a coin flip, I will give you 10 times what you had. So, let’s say you are worth 1 million dollars, if you put up your 1 million and flipped a coin with this man, he would give you 10 million if you won.

    Would you take this deal?

    1. constantine says:

      No! allocating 100% of your capital on one deal is dangerous. If the deal goes bad, you lose everything. It is always important to distribute your capital between different asset classes.

      1. Derek says:

        Diversity is for people looking for mediocrity.

        1. Steve says:

          I read “Why we want you to be rich” by Robert Kiyosaki and Donald Trump, and both agreed that diversity was just something that the schools taught you. It’s that cautious approach to investing that will hold you back from achieving great success. The 2 also agreed that you should focus in on something, and go all out. In their case, it was real estate investments.

      2. As much as I LOVE high risk investments, and a big return, I would never toss 100% into one single investment – Might as well put it all on red.

        You don’t have to diversify your portfolio into 100 different things, but at least a couple!!

        To me, that is the only insurance policy in the investment world – that being a diversified portfolio

        Even if you just had THREE investments – that is better than one – at one time, Seymour Schulich – one of Canadas wealthiest investors, had his entire net worth in a mere three companies.

        1. “The average American household may have $14,500 in debt but guess what? They have more than $14,500 in assets. So who’s richer?” I think the the bum is richer because he is already use to not having a home….LOL.

          I think that it also comes down to what you can handle. You can’t be stupid. Those who are falling financially right now are doing so because they thought that they could handle the risk because they didn’t hold themselves accountable to what would happen if everything just fell apart. The banks that are doing well are those that were capital strong and was cautious in getting into the fads of mortgages and selling the American Dream rather than letting people work for it.

        2. I agree with you. You’d be screwed if it didn’t go well. BIG time.

    2. ASANT Media says:

      While there is distinction between good and bad loans, we also have to remember to be able to make the payments when things go sour. These debt/loan vehicles were not meant for everybody to enjoy.

      Anybody remember the crappy economy we are in now? Ita due mainly to the fact that people thought they could be Donald Trump; however, eventually they could not afford to make payments after their house or investment decreased in value.

      While many people are quick to adore Donald Trump, you may want to read his book Trump Strategies for Real Estate. You may be surprised with the connections and lucky breaks he had before he ever even got started.

    3. Tushar says:

      Depends on you look at it.

      If you look at it from an emotional/logical point of view, then no, because it doesn’t make sense to put 100% of your assets on the line in a game of chance.

      If you look at it from a statistical point of view, however, then yes, because you’re taking a 50% chance to win 1000% back. If you filled 10 times, you’d be almost guaranteed to win 5 times and therefore win 5000% (with compounding).

      1. Holly says:

        If some one like Trump put 100% into a deal like that and lost, I can pretty much guarantee that within 5 years he’d probably be back on top again. Why? Because he thinks differently. It’s not the “stuff” he has that makes him rich, it’s his mindset and you can’t lose that no matter what deals you take on.

        1. Tushar says:

          I wouldn’t argue with you either.

          Trump has done it before, emerging from over $4 billion in personal and business debt, to become a billion.

    4. There’s a saying “don’t put all your eggs in one basket” this is the case with your example.

  3. Andrei Buiu says:

    I’ve read Neil’s article also and I disagree with it. “if you really want something,buy it when it’s on sale”? Without good debt in my opinion a business owner could achieve less or grow his business slower…

    1. i would rather have no debt……….

      1. Agreed. I have no debt right now & it feels great to be honest.

    2. Ben Pei says:

      LOL I thought its a Singaporean mentality. Buy it on sales.

    3. maybe I missed it but are U @andrel saying that without debt a business will grow slower? or is it the other way around?

  4. Ankur says:

    Robert kiyosakis rich dad poor dad series should be enough…… Reading that should be a must..

    1. Jeffrey says:

      i agree. kiyosaki’s stuff is great. his definition of assets and liabilities are the complete opposite from most ppl’s. In his paradigm, liabilities are anything take more money out of ur pocket than they put back in…like a mortgage (and even a paid off home). Homes are assets to the bank, not to the individual.

      The book he co-wrote with the Trump, Why We Want You To Be Rich, is a must read for anyone looking to learn how the rich get richer and the poor get poorer…and how to join the ranks of the rich.

    2. its a great series to change your thought process

    3. BusinessX says:

      Agreed, I consider myself a Rich Dad devotee. Another series (two book) is the Millionaire Next Door and Millionaire Mindset. Between the two teachings is everything I try to do. Oh, with Warren Buffet thrown in too.

  5. Strictly financially speaking Trump was right (at that moment), but if you add up all the experiences…well, I’m not sure I would choose “sleeping in the cold streets of Montreal” over “snorkeling in the Bahamas.

  6. Chester says:

    Well, too bad for Neil because he misunderstood the whole point of wealth and debt. The bums might not have any debt but I am sure they have no assets at all.

    So, the conclusion is, bums are of course poor.

  7. constantine says:

    “Say you purchased a house for $500,000 and you used cash because Neil said debt was bad. If the house goes up by 10% in a year (not likely in this market but this is just an example), you’ll make $50,000 for a 10% return. However, if you put that $500,000 as a down payment on a $5 million property and it goes up 10%, your return becomes 100%”

    John those leverage calculations have been used by marketers promoting real estate and currency deals, but what they don’t tell people is that if you put $500,000 on $5 million and the market goes down by 10% your capital is wiped out. This is the reason my many banks have had huge write downs.

    Human weakness is that people focus on the upside and forget the downside.

    1. Excellent point!! There always has to be a balance when it comes to buying an investment of this magnitude.

      But then again, anyone putting 500k down on a 5 million dollar property, PROBABLY has a sizable income to begin with, as to be able to even service the loan you’d need a significant income

      there are many factors to consider when looking at good debt and bad debt etc, including whether you could afford to put 500k on a 5 million dollar investment and be able to lose it all if it came to it and still be able to survive

    2. I think it also depends on whether you’re talking about your primary property, or if you’re trying to become a Real Estate Mogul. If you have $500k to put down on a $5Mill property, and your income is fairly secure, it may be a pretty good investment. You are leveraging 10:1 though so any % drop or raise will be magnified 10:1.

      If you have a +10 year horizon where you can service the debt regardless what happens to the property value, you should be ok since real estate does tend to go up in value over a span of 10+ years historically, but if you’re just trying to “flip” the house in 1 year you could end up picking up this asset when the market is doing a 20% nosedive.

      Also, from that 10% gain ($500,000) you also have to subtract the interest you paid to service the debt so it’s not $500k in pure profit. If it IS your primary residence, here in Canada your gains on the property are most likely free of capital gains taxes, but if it’s just an investment property you have to pay capital gains on that $500,000 if you did in fact make it.

      There are a lot of factors involved. However, I totally agree with John’s general gist of not being afraid of debt, and learning to understand GOOD DEBT from BAD DEBT. Most people have no clue what the difference is. OR they know, but don’t have the discipline to stay away from Bad Debt.

      1. Tushar says:

        I was going to mention the exact same fact that John did not subtract interest from option 2.

        Realtors’ fees would also be significantly higher on the larger home, as selling it would be the only way for you to really make money.

        1. John Chow says:

          Actually, you can make money without selling the house. You just need to get creative. Hmmm, that might be good for a future post.

          1. Tushar says:

            Do you mean like renting the house?

          2. John Chow says:

            No. That’s not being creative. That’s being obvious. There are tons of way to get your money out of a real estate deal without having to sell it or pay any taxes on it.

          3. Tushar says:

            How then?

            Do you mean by reverse mortgages or something?

    3. Thats the risk you are prepared to take. Also, it doesn’t matter if the property falls by 10% in the short term – as long as you can service the debt – then when the property market recovers you’ll once again see your profit margin.

  8. Max says:

    The next interesting question, of course, is: how do you go from bad debt to good debt? What does a bum have to do to become a Trump?

    Going from Trump to “Trumper” is relatively easy (money makes money), but what if you start out with nothing?

    1. Bums need a miracle to go from street to trump

      Ofcourse anything is possible, but to start with litterally nothing?? I would love to read THAT book when it hits the shelves

      1. no the bum just needs to think about what he can do to get people to give him/her money in a moral and ethical way.

    2. Starting out with nothing =
      Get a job.
      With that job = get a loan.
      With that loan = invest it
      With that investment = take out another loan which is safeguarded by that invesment.


  9. ketyung says:

    Hey John, I don’t agree that “A successful person welcomes failure”, it should be more correct a successful person will always dare to take the risk of failure. They’re willing to take the challenge and be prepared if it fails. Unsuccessful person will be put a stop once they think of there will be chance of failure in front, so they won’t try at all πŸ˜€

    1. Dan says:

      A successful person welcomes failure because they want to learn from it. You will not ever meet a successful person who has not failed at one point or another along their journey. An unsuccessful person lets failure bring them down.. That is if they even get far enough to fail.

  10. Melissa says:

    I agree with Ketyung….a successful person doesn’t welcome failure, but most successful people didn’t get to be successful without lessons learned from their past. John, what blog “failures” have you had in order to get where you are? I’m sure you could write a book on just those (or a short e-book!).

  11. david says:

    Hi, what happened to Li Weng ? : )

    1. Maybe he’s still asleep?? Took a day off?? hehehe

    2. I think he missed this post

  12. Excellent post – I completely agree. I know that over the years I have always run my businesses with a small deficit. Sure I could have paid off that debt, but I was able to use my income to buy investments, some of which have netted me over 100% return over a very short period of time. (See my blog for my stock picks)

    A debt is a risk, and you have to take a risk for a reward. Without any risk, how can you expect there to be a real reward of any kind.

    Even when the economic crisis hit, and sales started tanking, my debt came to bite me in the butt, just like it did to Donald. I had to sell some stock to pay the bills. Now that things have calmed down a bit, I am still a lot better off than most, despite the fact that I had to sell assets, as the outlook going forward will still be positive.

    Donald Trump is a very smart man, and it seems that we have now gotten another insight into how why John is as successful as he is. He thinks like Trump – he thinks like a successful person. πŸ™‚

    1. Tushar says:

      We must remember that for all his glamour and glory, Trump is not that that rich.

      Sure, he’s a behemoth for any of us, but in the commerce world, he’s not even a fraction of some of the real money makers, and they do not show off as much as him.

      1. John Chow says:

        Anyone who can achieve Billionaire status is pretty rich! There are tons of people with more glamor and glory than Trump but are no where near as rich. Most TV and movie stars would fall into that category. Someone like Brad Pitt or Tom Cruise would be better known than Trump but they aren’t close to being Billionaires.

        1. Tushar says:

          I have to give it to you there John!

          Billionaires FTW!

          PS: When I expect to see you on the Forbes 100?

  13. Joel Mueller says:

    John, I know what you’re getting at. You’re using teachings from Rich Dad, Poor Dad and other similar books. You think that Neil got it wrong in many ways, but I think you kill lessen your own authority when you starting using “absolute” ideas that create massive generalizations. “No one has ever gotten rich by paying off their debt” is a very large generalization. I know plenty of people who have paid off all of their debt and have multi-million dollar valuations. In fact, the book, The Millionaire Next Door, profiles a number of people who have paid off debt and have over $1m in assets.

    To say that they think differently is probably true in many ways. To say every successful high net worth person thinks the opposite of someone that isn’t is extreme and makes your teaching have less authority.

    Meanwhile, what’s the reason you’re shopping around Vancouver for multi-million dollar residential, single family homes?

    1. John Chow says:

      You made a key point. They have paid off all their debt and have multi-million dollar valuations. Did they pay off the debt when the valuation was only in the $100K or so? I doubt it. Debt build wealth. Yes, there will be a point when you will want to pay that debt off but for a successful person, it’s generally when they wish to slow down and are already rich. I don’t think Bill Gates has any debt now. πŸ™‚

      My reason for shopping for house at this time is easy. Houses are on sale!

      1. Tushar says:

        I doubt Microsoft has had any debt their entire time, as I’m sure I’ve read around that the Yahoo deal would have been the first time they went into debt.

        1. John Chow says:

          Since MS is a public company that is very easy to look up. At this time MS is debt free but they have access to a $2 billion unsecured line of credit that they can tap into for any reasons.

          1. Tushar says:

            I did do some research before posting that here John. After all, you can’t go in front of an influential and powerful blogger such as yourself without it πŸ˜‰

            They, however, have not used their line of credit, so it proves that you can become rich by not using debt.

          2. John Chow says:

            While MS doesn’t have any debt now, they had a ton during their start up and growing years. I’ve been a MS shareholder for sometimes now.

            This doesn’t have any effect on what I said. No one, person or company, have gotten super rich without using a lot of debt. That debt can come in the way of loans from banks or shareholders. When MS went public, they were basically borrowing from shareholders. Bill had to give up a lot of ownership in MS because of it. Now had Bill not done that, he would own 100% of MS today. But would MS be anywhere near the size it is now? I doubt it.

            Is it better to own 100% of a company worth $4 million or 10% of a company worth $140 billion? Like I said, it’s simple math. πŸ™‚

          3. Tushar says:

            You’re not technically borrowing from shareholders because you are not taking money from anyone, but instead you are selling something you already have, which defeats the meaning of debt.

          4. John Chow says:

            When you go public, you’re taking money from shareholders. However, instead of exchanging that money for debt, it’s exchange for equity. Here’s the key, this new equity can be borrowed against so the company can grow faster. That’s what MS did.

            This is also a reason why some companies issue a second offerings. Their balance sheet is not strong enough to support more loans, so they issue a second offering to improve their debt to equity ratio. Now they can borrow more.

          5. Tushar says:

            I understand what you are saying John, but Microsoft never really borrowed against that equity, did they?

            Either way, it’s getting to be 1 AM in this part of Canada (although it’s only 9 PM for you), and I do understand what you mean by good debt and bad debt, as there is such a thing as leveraging your debt, and I guess that’s what you’re hinting at.


          6. John Chow says:

            Yes, MS did borrow against their equity during the growing years. They hadn’t had to borrow a single penny for a long time now, except when it came to adding more buildings/campuses. While MS does have the cash to buy/build buildings outright, they like to put mortgages on them. I guess that free ups the cash to do other stuff.

          7. Tushar says:

            Which is pretty stupid of them, when you think of it. They’re paying unnecessary interest on those mortgages then, because they’re sitting on wad of cash and not doing anything with it.

      2. Joel Mueller says:

        Actually John, I know people that have gotten rich after they’ve worked to pay off all of their debt first. My point is that using sweeping generalizations just kills a teacher’s authority.

  14. Great post John… It’s obvious that you’ve done your homework, and know this material.

    And, that original post was pretty crazy. I don’t understand why people feel the need to write about stuff they don’t have a clue about.

  15. Bruno Silva says:

    Neil is just right… I guess you need to take some economy lessons John. πŸ™‚

    1. Ben Pei says:

      He doesn’t need to.. He doesn’t even have enough time to count his cash..

  16. Good point John…

    Neil made his money in web businesses I assume – so he is probably unfamiliar with the world of real estate investing – one of the best wealth building vehicles where it’s absolutely recommended to use “other people’s money” – i.e. debt.

    I happen to do a bit of both. Own a web business ( and also 3 rental properties. I don’t believe in taking on debt or venture capital to start a web business but for real estate absolutely.

    Btw, I think the term you were looking for when comparing how much debt you have with how much you have in assets – net worth! Sure you know this, just wanted to point it out.


  17. Great reactions there..
    Well said chow.

  18. Karl Hadwen says:

    Well Said, I’d hate to think a bum was richer than any of the average american or english man.

  19. Good analogy John , while Neil has a web business the dynamics compared to a real estate business is very different

  20. I really loved your friends comparison of the bum to a be far richer than average american ‘cuz he had no debt. Thats creative thinking i guess.

  21. Nice post John.. The reason I like is because I learn something new when ever I visit it.. Not going to comment on the above article as the above people have already done the needful.. Cheers ! πŸ˜€

  22. I can see this becoming a very popular post on your blog John!! it has already gotten some very indepth responses!! πŸ™‚

  23. 229tom says:

    No! F*** U , It really doesn’t means if I don’t have any debt( actually I have never took one- as I haven’t had such an need) Then I’m broke poor looser!

    1. John Chow says:

      You may not be a broke poor loser but you’ll never join the ranks of the super rich either.

  24. HatLord says:

    “The average American household may have $14,500 in debt but guess what? They have more than $14,500 in assets.” Which has been built/bought on DEBTS(most?, a few?, none?)! Therefore they are 2*$14,500 = $39,000 in debt.

    “However, if you put that $500,000 as a down payment on a $5 million property and it goes up 10%, your return becomes 100%”
    constantine made the point about this above (i.e. if it goes down you are totally wiped out)

    This is the doctors’ description for the sickness.

    1. John Chow says:

      You just proved my point. I never said money isn’t debt. It is. So if you want a lot of money, what do you need a lot of? Pretty simple, huh? πŸ™‚

      1. HatLord says:

        Obviously a lot of debt. In a microeconomics level you are right. If you play the game you get to win. But being all time on debt is not what it should be. You should pay them at some point. πŸ™‚

  25. While there is distinction between good and bad loans, we also have to remember to be able to make the payments when things go sour. T

  26. iamwhoyouare says:

    i have been a bum and sometimes “bums” are richer than the most wealthiest people on the planet there is more to life than monetary wealth. And this is how i lived my teenage years. But as i got older i realized that monetary wealth is important know i have a thriving business iam 26. I recently sold my business and iam investing my time and money online…Wish me luck lol….i have been making money so far!

    1. Tushar says:

      Good luck.

      PS: You should get a website. Linking to your email address on a popular public blog is a very, very bad idea.

  27. I have previously written a post on bloggin-ads before about how homeless people are definitely more richer than us. It was based on a experiment that the team at hostgator did. They went on the streets one by one and made a whole load of money!


    p.s. Most homeless are college graduates with degrees πŸ™

  28. Donald Trump is a mastermind. I have read his book and know of the story well. Good thing you also, did not use his name on your heading or he be heading for you. lol

  29. Okay, first, what you are talking about are retained assets in a depreciating market.

    So when you say debt; you aren’t actually saying debt. Debt is measured as an existing claim against the holder of an account that has exceeded it’s capital balance of zero.

    Also, what you said about real estate is a bit on soft side of understanding how financial gains work versus assets.

    You don’t actually have 50k on a 10% gain against a 500k home. You can’t measure the value of a home in liquid assets unless you sell the property. As most people will continue to either live in their homes or borrow against them; that money isn’t liquid at all.

    And, if they sell their home, there is a good chance that they will have to decrease their standard of living in order to maintain those newly acquired liquid assets.

    There are many forms of capital gain; but the illusion of housing is beginning to come home to roost.

    It’s sort of like people that believe they can outsource jobs without consequence to their product markets. The results of this can be seen in the dying auto industry; as their most-repeated customers were their own workers. Something that Henry Ford established a precedent with; when he advocated and enforced the 40 hour work week.

    Now that all of the Ford workers are laid off and their jobs are in Mexico, who is going to buy their big, crappy SUVs?

    Money is just more complicated.

  30. Young Che says:

    For all you bums out there, go get a JOB

  31. Rahul says:

    I’m not a financial analyst, but one thing is for sure that the american financial policy has proved to be wrong and that the recent recession has proved that too. They have been supporting mostly the non-productive areas rather than the more productive areas.

    I like the analysis part that you’ve done John, and I also admire donald trump too.

  32. Hey John, you’ve got it to the point. Thanks a lot for your nice tipps.

    @HatLord: good Idea – but I’m not shure how it works

  33. Well put John.

    It’s good to be out of debt, but to have no assets and no money doesn’t make you a wealthy man.

  34. I agree completely John. Positive financial leverage through good debt acquisition is a sure way to the top. I am a big fan of the Trump and have been to a couple of his wealth building seminars. It’s simple math… As long as you take in more money than the cost of the loan and operating expenses then you will come out ahead. A lot of people are afraid to take this kind of debt risk. No Risk = No Gain. Trump risked his way all the way to the top!

  35. It’s not only our asset to debt ratio to take into consideration, our good name has lots of value too.

    A bum on the street has no credit, and likely would have few connections to any wealthy individuals.

    Establishing a name for yourself and maintaining a good reputation (with your credit score and with people) has a huge value that cannot easily be measured.

  36. J.D. Meier says:

    I like the contrast of the mindsets.

    The key with the law of leverage is it works both ways. Real Estate is a prime example.

  37. Pheak Tol says:

    this is a great post, i never thought of being in debt as a good thing until i read this post, basically more of an investment move

    1. remember though that “good debt” is something that you can pay off right then or at least have enough assets to do so. You can buy a “good” investment on a credit card but if you have to pay interest for 5-10 years to get a return that might not be a good idea.

  38. Lanie says:

    Maybe Neil was just having “Bloggers Block” and started in on a ramble not really paying any attention to logic ! Knowing the difference between good debt and bad debt is criticial. If we are all honest we all probably have some ratio of good:bad. I know I do, but fortunately its much in favor for the good.

  39. Tom L says:

    I guess everyone is more or less in debt.ThatΒ΄s why lots of people turn to the internet and has hopes to make lots of money quickly, and so many still fail at it.Will they be the next ones on the street?

  40. This just reminds me of a bum that use to “work” at the same location as me. He sat outside on the sidewalk. Actually he sat on a 5 gallon bucket .. a 5 gallon bucket that he filled with the money people gave him as they walked by. He bought me lunch on several occasions .. he took a 30 minute lunch break just like us .. when we clocked out so did he .. he walked with us 2 blocks to the parking garage everyday only he drove off in a new porsche and headed home to a 2+ million dollar house .. I left in my mustang and headed to my apartment …. sucks I know .. but 2 years later when they cracked down on panhandling and seized a billion dollars in local property I didnt feel so bad. πŸ™‚

  41. Very good post. Neil’s post does seem like linkbait, but it worked didn’t it?

  42. Robin says:

    There are some topics for which there is no right or wrong answer … it all depends on one’s point of view. This seems like one of them.

    I’d rather be rich than poor.


    1. Tushar says:

      Yea, like the elections!

  43. Steven Appiah says:

    First off thank you for your website. COngrats on your success you have achieved.

    Debt for me was a four-letter word – I was old-school in the sense of save and pay cash.
    WHile I still hate bad debt, ironically it took the recession to realize that good debt is , well good. With wages at jobs being constrained, and mass lay-offs esp. in high paying jobs like manufacturing…I was left with no choice but to take some risk as such.

    It was upon realizing that debt used for income-producing assets, that I am now becoming closer to achieving financial security.

  44. Well, at least i’m not in debt and a big reason is that i don’t spend on things I can live without eg latest gadgets and latest music πŸ˜‰

  45. Juan Burton says:

    Makes cents to me! =)

  46. AJ Kumar says:

    Hi John,

    I’m a good friend of Neils and was the one who actually told him the original story of Donald Trump. I decided to write a post after your reply to explain what the original intent behind the story is.

    Here is the link:

    I have been studying and been actively participating in personal development/self help for many years. I wouldn’t say I’ve mastered human communication, but I’m unquestionably closer than most. Let me know what you think.

  47. “Rich” can mean several things to different people and we’ve just been looking at it from the perspective of money.

    I suppose someone could say that a bum is also rich because they’re “free” in a way to do almost whatever they want, when they want and have no real constraints from work, etc.

    But the social depravity that one must go through on the street like that transcends anything related to money…

  48. Goldfish says:

    Simply because Donald was spending $300,000 a month in living expenses does not mean that he was richer than the bum. In fact at that point he was poorer than the bum because he had a significant negative net worth. The advantage he had over the bum was that he had the potential to become rich again.

    I do agree with John that there is good and bad debt but what John did not mention is that leverage works both ways. Yes, you will make a lot more money on a leveraged investment IF the investment goes up. But you will also lose a lot more than just your principal if it goes down! Taking John’s example, a $5 million property purchased in Florida mid 2006 with only $500K down payment would result in a negative 300% return today!

    I posted additional details on this discussion here:

  49. ron hekier says:

    “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
    JP Getty

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