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Why Do Rich People Take Out Loans?

Why Do Rich People Take Out Loans?

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Why do the wealthy take out loans?

The answer is simple and includes three parts.

First, even if you have a lot of money, you might not want to lock up of your cash in home equity. Even if you live in the house, you might not want to have it all tied up in a house since you can’t directly access that cash if it’s locked up.

The only way to access the money is by taking out a loan against the home equity, or selling the house and enjoying the gains. That is, assuming there are gains of course.

Second, wealth people will take out loans to enjoy the liquidity of the cash. Maybe 10-20% or even 50% will go into a down payment but a loan might be used for the rest since that cash can be used as a safety net or to invest. I’ll explain that in a minute. Just consider that having a loan gives you leverage. You could take some of the remaining 50-90% of cash you did not put into the house, and invest it into a vacation home for example. You’ve got more options when you have cash.

Third, as I mentioned above, you can enjoy better returns on your money. For example, if you put $500,000 down on a $1,000,000 home, you have a $500,000 loan. Now, if you’re rich, maybe you could just pay that off. However, if the loan is something like 4%, then compare that to a stock like AT&T that often pays a 5% dividend. And, it’s “liquid” meaning you can pretty easily sell AT&T if you desperately need cash. And, in it might even go up in value so you might enjoy the dividend and a capital gain if you’re patient, and your timing is reasonable.

In short, if you don’t put all your money into home equity, you have many options with the cash that’s not locked up. You can even beat the interest rate, so that the dividends from a moderate stock portfolio could actually pay part of the mortgage over time. Or, you could just pocket the dividends and pay down the loan in other ways. Many options if that money isn’t locked up, see? 

NOTE: Not all “rich people” will take out loans even if they are drowning in cash. That is to say, many wealthy people absolutely hate debt and will always pay 100% cash. They never want any debt, even “cheap” house debt. They don’t mind locking up cash into home equity and feel more safe and secure that way. It’s a psychological factor to consider. It’s also about risk tolerance, which is likewise connected to psychology.

Now, how about you? Time to make money with a “side hustle” and grow, grow, grow, right? Freelance, grow a business, get rich, and come back and let us know how you feel about all this.

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ATTENTION! 100% FREE – New 16-page PDF Download
“10 Ways to Make $10 in 10 Minutes”  

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This might be of interest to you?

If You Can’t Afford A House, Don’t Buy One (Dave Ramsey)

OK, you’re turn…

Time to make money with a “side hustle” and then buy your dream home.  🙂

How to Invest in Your 401K Retirement Account

How to Invest in Your 401K Retirement Account

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If you’re going to invest into your Roth 401K then I suggest you watch these videos. They are short and extremely useful if you’re just getting started.

Stocks or Mutual Funds in My Roth IRA?

And…

4 Roth IRA Investing Hacks

4 things you NEED to know before opening a Roth IRA

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You know, they say “it takes money to make money” and there’s some truth to that. So, if you want to put more money into your retirement (or pay down your bills first, or load up your emergency fund, or wipe out credit card debt), the start making money. You can do it pretty fast, and gain real traction!

100% FREE – New 16-page PDF Download
“10 Ways to Make $10 in 10 Minutes”  

 

How Does Forbes Calculate Net Worth?

How Does Forbes Calculate Net Worth?

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Perhaps the best way to understand how Forbes calculates net worth is to pick a specific example. In this video, the Forces team explains how they calculated the net worth of Mitt Romney:

You might also like:

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Make Money Online By Putting Words Into The Computer

“GET A GOOD JOB”

My father wanted me to get a job working for the government. It was safe, he said. I’d get good health care and a pension. Good pay.

Truth? I almost became a teacher. (I love teaching. I respect teachers.)

Instead, I went to school for business, technology, psychology and other stuff. Got my education. Got one job — NOT a government job — then another, and another.

I did great. I really enjoyed the work.

That gave me energy. Power. (And money! For work! Turning time into money…)

It took a few years but I finally made it. My salary jumped to over $100K per year. It was a dream come true.

But I also I started consulting on the side. (20 years ago!) I landed contracts: $8K, $12K, $25K. Big money from big clients.

Why?

Your Employer = One Client

I realized that one employer, one job, set me up for “all or nothing” failure.

Sure, I could score a new job pretty fast. I hustle, I’ve got the education, and the experience. Still, I could lose my job then I’d struggle.

Screw that, I said.

And something else happened. I could actually see how 10 customers meant that if one “fired” me, I’d still have 90% of my income.

Makes sense, right? It’s simple diversification. More customers, more safety. But a job? That’s like having one client. All or nothing.

The numbers were obvious in another way too…

Clarity: Know Your “Dollars Per Hour” 

I took a hard look at the money I was making with my six-figure job. It was pretty awesome. But, literally, $100K = $50 per hour.

($100K divided by about 2,000 hours of work in a typical year. That’s about $50 per hour.)

And then I looked at how much I was making as a consultant. I was pretty easily hitting $125-150 per hour.

I had enough clients. I had enough hours. I’m an in-demand kind of guy. I’ll tell you more about that in just a minute…

First, let me summarize a few things.

1. Love what you do and you’ll automatically have energy to kick ass. When you kick ass, you will make more money. Simple.

2. Get educated. Why? The #1 investment that you can make is in yourself. How? It’s about lifelong learning. It’s experience.

3. Provide value. Make your boss look good. Give your clients 10x value. Help others get rich and “draft” behind them. Collect cash.

4. One job, one employer is like having one client. That job is a single point of failure. Multiple clients means multiple streams of income.

5. Know your numbers. Ignorance about your “money per hour” is no excuse. Calculate, know your baseline. What number will you beat?

You know, the most interesting thing is what I haven’t said.

I’m giving you permission to trade time for money. Hell, that’s what we all do.

All. The. Time.

We Trade Effort for Money

Even the rich put in the time. Don’t hate. Bless their wealth – They have earned their fortunes through work. And they saved.

(86% of millionaires are self-made. 62% of billionaires are self-made.)

Again, the rich are rich because they traded time for money. Sure, they are getting richer now without trading time for money.

But, getting started? The secret? It’s all about doing the right work at the right time for the right people. “Invest” in the success of others.

“I Love You!”

The problem is: What’s the right work? When is the right time? Who are the right people?

The best work is always in demand. What I’ve found is that there’s always a huge demand for content.

Sure, I’m talking about video, and audio. I’m talking about graphics. But, I’m absolutely in love with written content.

==> Articles, ebooks, blog posts, Kindle books, press releases, emails, sales copy, reports and more.

And listen, if you’ve got text content then pumping out video and audio is easy. The “hard part” of thinking and organization is done.

OK, so trade some time to write content. But, when?

This is all about you controlling your schedule. Nights, weekends, before work, lunch breaks, on vacation, at the beach.

Whenever. Wherever.

MORE POWER? MORE FREEDOM!

The secret here is that you are in control. Own your time and you own your life. Master your time and that’s freedom.

All sounds good, of course. But you’re wondering about WHO is going to buy. Who needs content? Who’s desperate?

I call them “Clients With Money” and there are millions of these people who need you. Like, they need you yesterday!

Clients With Money are people who are entrepreneurs. They own businesses. They are professionals who need support.

In other words, Clients With Money are just like you. They trade time for money.

And you don’t “sell” to them. You – and your text content – are in demand. They are looking for you. Right now. Today.

No weiRd cold calls.

No paying for Facebook ads, or posting 1,000 tweets, or any nonsense.

The demand is real.

It’s now.

Let me summarize (again).

I know it’s exciting and it makes sense. So logical. OK, here we go:

1. Building wealth is about trading time for money. It’s not magical. No fairy dust, or rainbow farting unicorns.

2. Create text-based content. Video and audio can come later. There’s huge demand for written words. Text!

3. Control is essential. Build your life around your work. Don’t force work into your life. Choose yourself. Pick your time.

4. Clients With Money are entrepreneurs and businesses. They need you. They love you. And, they believe in you.

5. Demand for content is so high that there’s almost no “selling” required. Focus on work you enjoy, get paid (again and again).

What’s really the bottom line?

You can make money putting words into the computer for Clients With Money.  <== 

Sure, there are amazing systems out there. I promote many of the best of them! I teach, I train. I host webinars. I work my ass off to help.

But getting started? Put. Words. Into. Computer.  (It’s lovely to trade time you control for money you deserve.)

You don’t need some advanced college degree. You don’t need any high-price technology.

Proof:

Clients with money often buy stories. Fiction. They also like case studies, travel reports, personal experiences.

Think of what you enjoy: Sports, Home Schooling, Politics, Romance, Alcohol, Video Games, Jewelry…

Clients with money are in all of these markets! (And more…) They have a burning desire for your words. Your text. They want YOU.

I have more to say about this… But for now?

Read this:

Get cash by putting words into the computer for Clients With Money.

(Laura is a champion. Pay very close attention to what she’s written for you. You won’t regret it.)

If you enjoyed this, please share it with friends and family. Post it on Facebook, and Twitter. Pay it forward. Share!

p.s. Once you have money? Then you invest. Then money creates more money. “Passive” and all that.  😉