When you work for money, you’re lost. Since 1971, all the money in circulation has been debt. As J.P. Morgan, one of the wealthiest men of his time, famously said: “Gold is money, everything else is debt.”
Knowing this, why work for money if more and more of it is printed every day? Why aim to get out of debt if money itself is debt? It all boils down to one simple phrase: “It’s the economy, stupid!” Recently, I’ve received a lot of criticism for shifting focus from investments to discussing how the economy works. However, I believe this is the only real way to generate significant wealth.
If you love your job and simply want a diversified portfolio that compounds over 30 years so you can eventually live off it, this might not be the place for you. Still, regardless of your goals, I think these principles will benefit you. This game is incredibly simple and starts with changing your mindset — learning to see debt and taxes as tools rather than burdens.
Leveraging Debt for Exponential Growth
Here’s an example I always keep in mind: Suppose I invest $100k at a generous 12% return. By next year, I’ll have $112k. Compounding wealth this way takes a long time. Now, imagine I take that $100k and use it as leverage to borrow another $100k (or more) at a realistic 10% rate. By next year, I’ll have $20k in profit. Repeating this process multiple times yields exponential results.
Tax Optimization: The Key to Keeping More of Your Money
Corporate executives know how to play this game too. Take Elon Musk as an extreme example — do you think he gets paid by Tesla? No. He receives stock options which, when sold, are taxed at much lower rates.
Understanding Income Categories: Earned, Portfolio, and Passive
Robert Kiyosaki, another polarizing figure in finance but often correct in his insights, categorizes income into three types:
- Earned income
- Portfolio income
- Passive income
The first type keeps you poor; the other two make you rich.
The Trap of Earned Income
Earned income, taxed at over 30% in most countries — and up to 50% if you earn more than $100k — is essentially halved before it even reaches your pocket. While many accept this as normal or legitimate, I see it as legalized theft, especially considering how that money is spent. If you’re stuck here, aim to move out of this category.
Portfolio and Passive Income: The Path to Wealth
Now for the interesting part — the two types of income worth pursuing:
- Portfolio income, which includes capital gains from buying/selling stocks or dividends. This is taxed at much lower rates (20–25%). For every $4 earned through earned income where you keep $2, here you keep $3 — a significant improvement. Think about it: If you’re salaried at $100k annually and suddenly your boss raises it to $150k overnight — that’s what switching to portfolio income feels like.
- Passive income, which Kiyosaki claims can only be achieved through real estate. He argues that by deducting expenses like repairs, maintenance, and insurance — and leveraging tax benefits — you could end up paying 0% tax on rental income. While this approach may seem risky for many, there’s an alternative strategy that achieves similar results with less complexity.
The “Buy, Borrow, Die” Strategy
This strategy is called “Buy, Borrow, Die”:
- Buy assets
- Borrow against them
- Use the borrowed funds to:
- Pay off loans
- Invest in more assets
- Cover living expenses
As mentioned earlier, debt combined with tax optimization has exponential power when used correctly.
From my perspective, we should focus on the last two types of income. The goal isn’t to avoid taxes entirely but to minimize them while maximizing borrowing power safely within your portfolio.
In a few weeks, I’ll explain how to create a portfolio that meets these criteria — requiring only 10 minutes per year to manage while providing regular dividends for you to enjoy.
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Please note that while we strive to provide accurate and helpful information, this article is for informational purposes only and should not be construed as financial or legal advice. Always consult with a professional advisor before making any investment decisions.
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