The Value of Debt: How to Manage Both Sides of a Balance Sheet to Maximize Wealth

Chapter 1

Strategic Debt Philosophy: An Overview

How This Book Can Add Value to Your Life

This book aims to bring forth a new vision of the value of debt in the management of individual and family wealth. On the one hand, virtually every company already looks at both sides of its balance sheet—assets and debts—and consciously strives to come up with an optimal debt ratio.1 On the other hand, the vast majority of individuals, wealthy or not, are either dramatically overleveraged (have too much debt) or, at the other extreme, are substantially underleveraged (have no debt at all).2 Those in this second camp typically hold the notion that debt is always bad, should almost always be avoided, and if taken on, should be paid off as soon as humanly possible.

There is a reason, however, why practically all companies acknowledge the value of debt and seek to have an optimal debt ratio in place.3 Simply put, by strategically taking on and managing debt, these companies realize that they can take advantage of what we’ll call the Indebted Strengths that come along with that debt, which, as we’ll describe shortly, include Increased Liquidity, Increased Flexibility, Increased Leverage, and Increased Survivability.

As it turns out, despite the general antidebt knee-jerk reaction that most people have, many wealthy individuals and families—from the moderately affluent to the ultra-affluent—can also make use of these Indebted Strengths to their own substantial long-term advantage. For starters—in ...