4 Borrowing Rules Rich People Follow But Others Often Don’t

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Can you benefit from following these rules too?

the main points

  • Wealthy people borrow money just as low-income people do, but they borrow in different ways using debt as a tool to build wealth.
  • They also borrow for various reasons, including earning rewards on credit cards that end up paying back more than they pay on.

Borrowing money may sound like something you only do if you don’t have enough of it, but it’s just not true. There are many rich people who take on debts; They do this in different ways than their less affluent counterparts.

Of course, not every rich person has the exact same money habits. But here are four rules for borrowing that the wealthy tend to follow that others often don’t.

Rich people are not afraid to borrow. But they usually do not borrow money to live beyond their means or because they have failed to do so Save for emergencies Or make a plan to cover the expenses.

Instead, the wealthy tend to use debt as a tool to help them build more wealth. For example, wealthy people may borrow money to acquire a company if they believe they can improve its profitability. They may also borrow to fund a startup, or use margin for their business brokerage account To invest in more assets that will help them build wealth.

2. Have the credit cards pay you instead of you paying them

Rich people often use it credit cards. But instead of paying interest to their card issuers, they do Collect rewards By collecting all their purchases and then paying their balance in full to avoid any interest.

By collecting rewards and never paying out Credit card interestThe rich get richer as a result of their relationship with their card company rather than get poorer. Many wealthy people sign up for cards using Big annual feebut they do so to take advantage of the valuable perks these cards offer, such as concierge service, flight and hotel upgrades, and more.

3. Do not borrow to depreciate assets

Usually, the rich know that it doesn’t make sense to borrow against anything whose value decreases over time rather than increases.

By borrowing for things like cars, consumer goods, groceries, or vacations, you end up making those purchases more expensive and thus wasting money on them. Unless whatever you borrow for will grow your wealth over time, it’s not worth paying interest charges to finance it.

4. Make the lenders work for your business

Finally, the wealthy just don’t accept any loan that is offered to them on whatever terms the lender wants to give them. They often make lenders work in their business.

This might include doing something as simple as shopping around for different quotes before selecting a bank or bank credit union to take a loan from him. Comparing offers simply allows you to go with the company that gives you the best deal – rather than just going with the financial institution you happen to find first.

Sometimes wealthy people take this process even further. They may ask for fee discounts or other special borrowing privileges, especially if they have a relationship with lenders and can leverage that to get better loan terms.

The good news is that you can follow all of these rules even if you aren’t already rich. Doing so may help you become wealthy over time.

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