CHAPTER 13:How Millionaires Handle Debts

Debt can either build wealth or destroy it—it all depends on how you use it. Millionaires don't avoid debt completely, but they use it strategically to make more money, not to trap themselves in financial struggles.

The Two Types of Debt

1.Bad Debt (Avoid This)

High-interest credit card debt

Loans for things that lose value (cars, unnecessary gadgets, luxury items)

Payday loans or borrowing for short-term wants

2.Good Debt (Use This Wisely)

Business loans that increase profits

Real estate loans for rental properties

Student loans (only for valuable, high-earning degrees)

Investments that generate cash flow

How Millionaires Avoid Bad Debt

✅ They Pay Off High-Interest Debt First – They don't let credit card balances pile up.

✅ They Use Cash for Depreciating Assets – They don't borrow money for things that lose value.

✅ They Never Borrow for a Lifestyle Upgrade – They increase income before upgrading their lifestyle.

✅ They Build an Emergency Fund – This prevents them from relying on debt for unexpected expenses.

How Millionaires Use Good Debt to Their Advantage

✅ They Use Leverage in Business – They borrow to expand businesses that generate more income.

✅ They Finance Real Estate Investments – They use mortgages to buy properties that pay for themselves.

✅ They Keep Debt-to-Income Ratio Low – They don't take on more debt than they can handle.

✅ They Pay Off Debt Quickly – Even when using good debt, they pay it off as soon as possible.

Action Steps: Managing Debt Like a Millionaire

✅ List all your debts and categorize them as good or bad.

✅ Make a plan to eliminate bad debt quickly.

✅ If using debt, ensure it's for something that increases your wealth, not drains it.