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

Chapter 3

Strategic Debt Practices: An Overview

Chapter 2 provided an overview of Strategic Debt Philosophy—the ideas and theoretical underpinnings behind the use of Strategic Debt. In this chapter I will turn more directly to Strategic Debt Practices and applications—to real-world techniques and action steps—and the likely advantages and results of applying the philosophical stance and theoretical ideas we’ve been considering. The major Strategic Debt Practices that will be touched on include

• Understanding and taking advantage of your Indebted Strengths
• Achieving and maintaining an ideal debt ratio
• How to calculate your own current debt ratio
• When to pay down your debt, and when not to
• A quick first look at a number of advanced practices to be covered in Part III

Understanding and Taking Advantage of Strategic Debt Philosophy

Earlier I provided a brief definition of the four Indebted Strengths of Increased Liquidity, Flexibility, Leverage, and Survivability. Given the importance of these four concepts both as philosophical ideas and as real-world practices that can make a tremendous difference in your life, let’s return to and expand on each of them with a simple example in mind. By understanding exactly how the four strengths apply in a real-world situation, you will likely be more able to see how they might be applicable in your own case as well, leading you to more readily embrace the wider variety of Strategic Debt Practices.

The Smith family consists of Mr. Carl Smith; ...