Author(s): Tom Anderson
This book strives to develop a new vision of the value of debt in the management of individual and family wealth. Virtually every company examines both sides of its balance sheet--assets and debts--and consciously strives to achieve an optimal debt ratio. In contrast, the vast majority of individuals, wealthy or not, are either dramatically over leveraged (too much debt) or, conversely, believe that debt is always bad and should be paid off as soon as humanly possible.
There are reasons, however, why practically all companies acknowledge the value of debt and seek to have an optimal debt ratio in place. As it turns out, many wealthy individuals and families--from the moderately affluent to the ultra-affluent--can also make use of similar strategies, leading to substantial long-term economic advantage. The strategic use of debt can enable individuals to become progressively wealthier by "capturing the spread" between the cost of debt and the return on investment that potentially can be generated. The use of debt can also help generate tax-free income in retirement and provide instantly available funds needed to respond to natural disasters, health crises, or personal financial difficulties. The book frames the discussion around what is an optimal debt ratio, as well as the costs, benefits and risks of implementing the strategies.
Foreword Acknowledgments Introduction Part I: The Value of Debt in the Management of Wealth Chapter 1: Strategic Debt Philosophy--An Overview How This Book Can Add Value to Your Life The Five Tenets (or Action Principles) of Strategic Debt Philosophy First Tenet: Adopt a Holistic (Comprehensive)--Not Atomistic--Approach Second Tenet: Explore Thinking and Acting Like a Company Third Tenet: Understand Limitations on Commonly Held Views of Personal Debt Fourth Tenet: Set Your Sites on an Optimal Personal Debt Ratio Fifth Tenet: Stay Open-Minded, Ask Questions, and Verify "What Works" Chapter 1: Summary and Checklist Chapter 2: The Basic Idea--Limiting the Costs, the Impacts, and the Duration of Financial Distress Risk of Financial Distress The Direct and Indirect Costs of Financial Distress The Impact of Financial Distress: Five Levels The Duration of Financial Distress The Four Indebted Strengths: A First Look The One Thing You Must Definitely Do! Chapter 2: Summary and Checklist Chapter 3: Strategic Debt Practices--An Overview Understanding and Taking Advantage of Strategic Debt Philosophy Achieving and Maintaining an Optimal Debt Ratio Calculating Your Debt Ratio Should Your Primary Residence Be Included in Your Debt Ratio? When to Pay Down Your Debt, and When Not To Advanced Practices and Scenarios Chapter 3: Summary and Checklist Part II: The Assets-Based Loan Facility Chapter 4: The Incredible Value of an Assets-Based Loan Facility ("ABLF") What an ABLF Is and How It Works The Many Advantages of Having an ABLF in Place Why Virtually Every Company Has a Line of Credit 4 Surviving Storms and Other Natural Disasters The Criticality of Being Proactive and Assessing Risks Family Finances: First Bank of Mom & Dad; Eldercare Bridge Loan Taking Advantage of Opportunities and Distressed Sales Average ABLF Usage and the Win-Win-Win Scenario Chapter 4: Summary and Checklist Part III: Scenarios For Success Chapter 5: Long-Term Wealth Amplification Through "Capturing the Spread" The Basic Concept: Inherent Risks with Great Potential Rewards Three Key Factors to Consider Some Scenarios for Capturing the Spread Synching With Your Investment Strategy Chapter 5: Summary and Checklist Chapter 6: Holistic Financing of the Expensive Things You Need and Want A Better Way to Buy: In the Company of Holistic Financial Thinkers Four Principles When Financing the Purchase of a Desired Item A Better Way to Purchase a Vehicle (or Almost Anything Else) Purchasing a Second Home: Plusses and Minuses 100% Financing: The No Down Payment Real Estate Purchase Option Chapter 6: Summary and Checklist Chapter 7: Generating Tax-Favored Income in Retirement or Divorce: Introduction: Three Goals (and Some Disclaimers) An Opening Scenario for Generating Tax-Free Income in Retirement A Better Alternative to a Familiar Story A Better Investment: Enhanced Leverage and the Freedom to Choose Revisiting Tax Issues Making Use of Strategic Debt Strategies and Practices in Divorce Chapter 7: Summary and Checklist Part IV: Conclusion Chapter 8: Conclusion What This Book Is Really About What We Hope You Have Taken Away Strategic Debt as a Financial Engine Over the Decades Paradoxes of Plenty: Some Surprises in Maintaining an Ideal Debt Ratio Investing In the Future: A Cautionary Reminder A Final Thought Chapter 8 Summary: A Recap of the Book's Significant Lessons Part V: Appendices Appendix 1: The Varieties of Debt Appendix 2: Strategic Debt Practice for the Young and Those With Limited Assets Appendix 3: No Guarantees--Limiting the Risks of Investing in a Crazy World Appendix 4: Some Examples of Ideal Debt Ratios Glossary Bibliography About the Author About the Companion Website Index