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The Value of Debt in Building Wealth

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The Value of Debt in Building Wealth


15 min read
10 take-aways
Audio & text

What's inside?

Keep your home mortgage, and devote your money to fattening up your retirement account.

Editorial Rating



  • Applicable
  • Well Structured
  • For Beginners


Ah, the good old days of frugal Ben Franklin and mortgage-burning parties. If you’ve bought into the old-fashioned notion that debt-free is the best way to be, Thomas J. Anderson offers some unusual counsel. In this compelling and contrarian book of financial advice, he walks through the reasons you’d be wiser to fatten your retirement account than to pay down your mortgage. His strategy focuses on the miracle of compounding interest: Redirecting cash to a 401(k) – or to a retirement account, for those not in the US – when you’re 30 or 40 means that money will have decades to grow. Anderson is suggesting a safe and sound way for responsible investors to stretch their nest eggs farther. While never giving investment advice, getAbstract recommends this how-to guide to new investors and savers.


Debt Is Not All Bad

Many financially savvy Americans regard debt with deep suspicion. Credit card balances and payday loans are losers’ games, according to financial gurus like Dave Ramsey and Suze Orman. This advice is accurate as far as it goes. You’ll never achieve financial stability by overspending or by paying usurious interest rates on consumer debt. But you could consider a more nuanced view of borrowing, one that combines the concept of “good debt” with the idea that many consumers are disciplined and smart enough to borrow rationally. The concept of using debt to build wealth doesn’t mean you should embark on a shopping spree. Fancy cars, huge homes and extravagant vacations won’t lead most people to financial stability. Instead, debt is a useful tool only if you’re willing to spend less than you make.

Debt is risky, but it gets an undeservedly bad rap. Call it “anti-debt hysteria.” For a different perspective on how to handle borrowing, consider how companies manage their balance sheets. In the corporate realm, debt isn’t evil; it’s just part of life. Of course, businesses try not to become heavily indebted, but they structure their obligations...

About the Author

Thomas J. Anderson, founder and chief executive of Supernova Cos., a financial technology company, is also the author of The Value of Debt and The Value of Debt in Retirement.

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    h. s. 6 years ago
    Interest concept but will credit card debt be liable as good if that was used for business that generate profit more than credit card interest.

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