15 Smart Ways to Use Debt to Grow Your Wealth

Hey there Aluxer, by the end of this video you're going to be feeling more motivated and comfortable with doing 2 really important things. Buying property and starting your own business. You'll see just how many opportunities you have to turn debt into income. There are so many paths to this, but because you hear so much about the bad side of debt, you end up running from it and missing out on the good parts too. Debt and discipline are in a constant battle for your financial future. You need to learn them, master them and use them to your advantage, which is exactly what we're diving deeper into on the Alux app today. You can download the app right now and listen to it. And we've got an extra exclusive offer for you. Download the app, scan this QR code on screen and you'll get 25% off the annual membership. The wealthy have gotten to where they are because they see debt as a tool. They use it to buy assets, build businesses and increase their income. This video is going to flip the script on debt showing you how to use it to grow your wealth instead of letting it drain your bank account. Debt is a part of life. The difference between staying broke and building wealth comes down to how you use it. So today we're showing you 15 ways to use your debt to build wealth without getting buried underneath it. 1. Use a mortgage to buy rental property and let tenants pay the loan There are so many ways to grow your wealth when you own a property and we'll cover 2 of them right now. If you're smart about it, you can use the bank's money to build wealth by turning debt into an asset that pays for itself. That's exactly what landlords do. They don't buy their properties with cash. They borrow money to buy them, then they use other people's money, their tenants' rent, to pay off the loan. Let's say you find a rental property for $200,000. You don't need $200,000 in cash. You can go to the bank, put 20% down, that's $40,000 and the bank covers the rest with a mortgage. Now instead of spending decades saving up to buy a house outright, you own a cash-flowing asset today. Then you find tenants who pay rent, let's say $1,500 a month. Your mortgage payment, taxes and maintenance are about $1,200 a month. That means after expenses you pocket $300 every month without working for it. That's passive income. Over time, 2 things happen. 1. Your tenants keep paying down your mortgage for you and 2. The property goes up in value. Maybe in 10 years time, that $200,000 home is worth $300,000. You didn't just make money from rent, you built equity without lifting a finger. And speaking of equity… 2. Build against your home equity to buy more property or start a business If you own a property, then you can borrow against it to buy more property or start a business. Number 1 lets your tenants pay off your mortgage for you and number 2 lets you use what you've already put into your home to fund your next venture. You can do this with something called a Hello C or Home Equity Line of Credit, which lets you borrow against the value of your home to fund real estate investments or other income generating moves. You end up borrowing at a lower cost and using money you already have. Instead of your home equity just sitting there, it's working for you and actually building more wealth. But you need to have a clear plan and invest in real estate that generates cash flow, otherwise you risk losing your home outright. Number 3. Borrow money to buy assets that generate income Cars, clothes, gadgets… the second you swipe your card on these things, that money is gone. That's bad debt. But if you're smart, you'll borrow money to buy things that put money back into your pocket. And you can do this to generate passive income or put it into side hustles, which we'll talk about a bit later. Smaller loans allow you to do this. That's how you build wealth without waiting decades to save up. It's called leveraging debt to buy cash-flowing assets. So say you take out a loan for $50,000, do you spend it on a luxury car or an asset? Well, the first option means you're stuck paying off a loan with no return. In the second option, the asset covers the cost plus extra money in your pocket. You then use that money to buy, say, a few vending machines that you put in busy areas. They bring $4,000 in revenue. You spend $2,800 restocking on maintenance and the loan payment and you end up with $1,200 a month in passive income. Now, the debt is no longer a burden, right? It's a tool that helps you build an income stream. Now, a side hustle will take up more of your time than a passive income stream like the one we just spoke about, but it also has the potential to make more money. Like any venture though, getting started is not free. You'll need a little bit of money upfront. If you can find a niche in something that has low startup costs, fast payback and proven demand, then you're funding something that has a clear path to profit. That's so much more stable than blindly borrowing to start a random business. So if you're borrowing for a side hustle, make sure it's one that actually makes money and not just something that's an expensive hobby. If you borrow just enough to get started and the business makes enough to cover the payments and turn a profit, then the debt was worth it. If you're willing to put in the work, time and sacrifice, then you can take that side hustle to the next level and turn it into a full-scale business. And the good news is you can get a loan for this too. Most successful businesses don't start off with personal savings, they start with borrowed money. If you know how to use it right, debt can be the shortcut that gets your business off the ground or helps it grow faster than you ever could on your own. So say you want to open up a coffee shop and you've done your research, you know there's a demand and you've even found the perfect location, but you don't have $50,000 sitting in your bank account to cover the rent, equipment and setup costs. Well this is where a business loan comes in. Instead of waiting years to save up, you go to the bank, get a small business loan and use that money to launch your cafe today. Now instead of waiting, you're making money. Serving customers, building your brand and paying off the loan with the business's income instead of your personal paycheck. The key is to only borrow money when it directly leads to growth. Sometimes you don't need a big loan, you just need extra cash to keep things moving. That's where a business line of credit comes in. Unlike a regular loan, a line of credit lets you borrow what you need, when you need it and you only pay interest on what you use. It's like a financial safety net that keeps your business running smoothly. Let's say you run an e-commerce store. A supplier offers you a bulk discount, but you don't have the cash up front. A business line of credit lets you grab that deal, sell the products and pay it back fast without draining your cash flow. Or maybe your business is seasonal. Sales dip in the slow months, but expenses don't stop. A line of credit covers rent, payroll and inventory until sales pick back up again. It's a way to use short-term debt to unlock more profit. Just don't get carried away here, only borrow what you can quickly pay back. FINANCE TOOLS FOR WORK THAT CAN INCREASE YOUR INCOME IMMEDIATELY If you want to increase your income, but you're not ready to take the leap into a loan or a full business, side hustle or passive income venture, fear not, you can still borrow to increase your income, but on a much smaller and manageable scale. If a one-time purchase helps you increase your income every single month, that's not bad debt, that's a shortcut to higher earnings. A photographer finances a $3,000 camera and books bigger clients, making an extra $1,000 a month. A carpenter takes out a small loan to buy better tools, doubling the number of projects they can finish. A video editor upgrades to a faster laptop and takes on twice as many clients. In all of these cases, the debt isn't a problem, it's the reason they're making more money. The key is making sure it pays for itself. If the equipment speeds up your work, helps you take on more clients or increases what you can charge, it's an investment. If it's just a fancy upgrade with no return, it's just more debt. Before borrowing, ask… Will this tool actually increase my income? If the answer is yes, then the debt is working for you, not against you. 8. Only take on student loans for degrees that guarantee high salaries Do you see student loans as a trap? A never-ending cycle of debt that takes decades to pay off? Or do you see it as a way to get access to higher paying jobs, better opportunities and a skill set that pays off in the real world? Perspective matters here, ok? If you see them as a trap, it will become a trap. Some degrees almost guarantee you a job that covers the loan payments easily. Engineering, medicine, computer science, finance… If a degree puts you in a career that pays 6 figures, borrowing money for it makes sense. But if you take out $100,000 in loan for a degree that only gets you a $35,000 a year job, you're stuck paying off that debt that your salary just can't handle. That's when student loans do become a financial prison. A student loan can be good debt if it meets 3 conditions. It leads to a high-paying career, you don't borrow more than you need and you have a solid plan to pay it back fast. 9. Use your credit card for rewards, not expenses The sooner you learn this, the better your life will be, seriously. Credit card debt is where most people go wrong with borrowing, because high interest rates and endless minimum payments are a total trap. But if you use it strategically, that same credit card can build your wealth instead of draining it. You get the most out of credit cards when you use them for rewards, not debt. A credit card with cashback or travel points turns regular spending into free money, but only if you pay it off in full every month. If you carry a balance, then the interest wipes out any benefit. Credit cards can be a useful tool when you take advantage of 0% interest offers. If you need to fund a business expense or invest in something that makes money, this gives you time to pay it off without extra costs. And you can use it to build credit for bigger opportunities. Using credit cards responsibly raises your credit score, so you'll get better loan terms, lower interest rates and more financial options down the road. If you learned this a little too late and you're stuck in a rut, don't worry, you can still use debt to get out of debt. Which brings us to number 10. That interest rate is keeping you stuck in a debt cycle far more than the original loan does. Some of these charge 20, 25, even 30% interest. That means if you owe $10,000, you could end up paying $13,000, $15,000 or more just to clear that balance. You can't just make minimum payments and hope for the best, you have to leverage those lower interest loans to wipe out high interest debt. One option for this is debt consolidation. That's where you take out a low interest loan and then use that money to pay off a high interest loan. That way, while the interest debt is gone and while you still owe the money, you're paying it at a much more manageable interest rate. But this strategy only works if you stop using bad debt. If you consolidate but keep swiping that credit card and rack up more debt, you'll end up in a worse hole. You have to cut that cycle. Even if you've ended up in the debt trap before, where you used borrowed money to buy things that don't increase in value, you still have a chance to fix things. Let that be your lesson that your credit score isn't just a number, it's your financial reputation. It determines what kinds of loans you qualify for, what interest rates you get and whether you can buy a home or start a business. You don't build good credit by avoiding debt all together, you build it by using debt the right way. So you've got to take on small, manageable debts and pay them off on time. Keep your credit card balance low. The lower your balance compared to your total limit, the better your credit score. One of the first things that people do when they get a line of credit is to finance a new car. Avoid that, it's a trap. A car loan can either help you to make money or drain your finances. If that car pays for itself, the loan works in your favor. If it doesn't, you're just adding debt for something that loses value. A loan makes sense when you need that car for work. If you're a real estate agent, a contractor or a rideshare driver, your income depends on having a reliable vehicle. The loan lets you get the car that you need to keep on earning. You qualify for tax benefits because business use vehicles can help to lower your taxes. You may be able to deduct loan interest, depreciation and fuel costs. You need to keep cash available and paying for a car in full locks up money that you could use for better investments. A low interest loan spreads out the cost while keeping your cash free for other opportunities. If a car doesn't make you any money, avoid that debt. If it does, finance it wisely and let it work for you. With all of these business and home loans you're racking up and all the money you're making, your taxable income is going to skyrocket. Lucky for you, certain types of debt come with tax benefits, which means you can legally reduce your taxable income and keep more cash in your pocket. Like if you own a home, you can write off the interest on your mortgage, which lowers your taxable income. If you've borrowed to grow your business, well the interest on that is also a tax deduction, so your business pays less tax. Or if you finance a rental property, you can claim depreciation on the property's value, even if it's increasing in price. And again, that will reduce how much tax you pay. Even when you're in a crunch and need money, it's better to keep your stocks and assets and then take out low interest loans against those assets. That will help you to avoid capital gains taxes and keep your investments growing. 14. Borrow money to invest, use gains to pay it back and keep the profits Now we're getting into the more experienced investors part. So experienced investors don't just use their own cash to invest, no they borrow money to invest more. It's called margin investing and if you use it properly it can amplify your gains. If you don't know what you're doing though, it can completely wipe you out so you have to be careful here. If you've got $10,000 to invest, you can borrow another $10,000 from your brokerage and invest $20,000 instead of $10,000. If your stocks go up 10%, you make $2,000 because you're investing double the amount. The hope is that at some point, you'll make enough to pay back the loan and then you're riding on what you've made. The risky part, obviously, is that if the market goes down, your losses will double too. If the losses keep piling up, your broker can issue a margin call, which means they force you to sell your stocks at a loss or deposit more cash. So this is only for people who actually know what they're doing and who can afford to lose. 15. If you need cash, rather borrow against your assets or stocks instead of selling them The rich don't just use debt for tax breaks, no, they use it to avoid taxes completely. Instead of selling their investments and paying a capital gains tax, they borrow against them. A real estate investor who needs cash doesn't sell a building. They take out a low-interest loan using the property as collateral while it continues to increase in value. A stock investor does the same. Instead of selling shares and paying taxes on the profit, they borrow against their portfolio to fund a new venture. Because loans aren't taxed, they get access to money without triggering any capital gains taxes. That's how they keep building their wealth while paying less in taxes overall. So Aluxer, if there are all of these opportunities available, why don't more people use them? Well, 2 reasons. First of all, many people just don't know what's out there or how to use them. But now that we've given you the knowledge, you have no excuses. And the second reason is a lot harder. All of this, everything we talked about, it takes discipline. You need to be on top of your admin, expenses and income. You need to be able to control your impulses. Because debt is a discipline problem. If you want to dive into this more, we've got an exclusive daily session on our Alux app that's all about the relationship between debt and discipline. Here's that QR code again to save you 25% off just in case you missed it. I'll see you on the inside.