Money Forward

This blog is about money and trying to keep my money from flying out the window.

Wednesday, February 07, 2007

The rich are borrowing more than everyone else

This article from the WSJ through Yahoo!Finance talks about hwo the rich are actually more in debt than everyone else, except they use it for different reasons. What is most interesting is that they're going into debt so that they can make more money with the money they have. Basically playing the arbitrage game.. with a lot more money.

If the rich can do it, so can I.

3 Comments:

  • At 4:06 PM, Anonymous samerwriter said…

    I liked the last quote of that article:

    "What we're seeing is the top 1% struggling to keep up with the top 1/10th of 1%," he adds. "And those people trying to keep up with the top 1/100th of 1%. There is a drive by the merely rich to keep up with the obscenely rich."

    It's a reminder that, just because you're rich, there's still a psychological need to keep up with the guy next door.

    On the other hand, if you can overcome the urge to keep up with the neighbors, you can do just fine, living simply, without desiring to become rich.

     
  • At 5:25 PM, Anonymous nancy said…

    I don't know if you have the equivalent in the States (I'm in Canada) but I am using a method growing in popularity up here. It's called the 'Smith Manouever". Each month, for the amount my mtg principal is paid down, I have an automatic increase in my line of credit, of that same amount. Since the loc is secured by my mtg, the interest rate is favourable - at prime. I then use that loc to buy stocks with. The interest on the loc, since it was used to invest with, is tax deductable.

    At the end of the 20 year mortgage, the mortgage will be paid off. I will have a line of credit of the same amount as the original mortgage, that I've fully used. The LOC will have paid for an investment portfolio. The investment portfolio 's growth should exceed what I pay in interest (since historic rates of stock market return are higher than prime lending rates). If I wanted, I could then pay off the L0C -- but why would I, when the portfolio is not only generating enough to cover the interest payments, but enough to add to my cash flow as well.

    So ... it doesn't have to be just the 'rich' who use debt as a means to get ahead :)

     
  • At 4:33 PM, Blogger MoneyFwd said…

    samerwriter: humans are competitive by nature, it's jsut too bad that most of us haven't evolved enough to know when to stop.

    Nancy: that's interesting. I'm going to have to look into that.

     

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