Leverage: The Financial Insta-Pot
Why Leveraging debt could accelerate your financial freedom
Achieving financial freedom is regarded as one of the keys to early retirement, globe-trotting and a happy life. Leveraging debt is one of the fastest means to cut down many years that most people spend working hard and saving to gain capital for investments. Leveraging debt has been defined as the use of borrowed funds to finance investments with a view to make returns higher than the interest rate charged on the loan. Companies use debt to finance running stock and new ventures to avoid having to raise more capital from shareholders. Leveraging is not strange to how we live. When you rent a house or office, drive a car you never made, wear clothes and shoes you never made. All these are forms of leverage. They help you enjoy other people’s technology at a very small percentage of their initial cost.
Leveraging allows you to own without spending
Most people have the ability to purchase their home using a mortgage and a financing vehicle of some sort. All they needed to do was to convince a lender that they will somehow commit to pay the loan amount for the specified period. The lender then goes ahead to pay the home developer the full value and the Borrower ideally becomes the owner of the home. This concept is well engrained in the housing sector and is helping investors finance commercial projects. With leveraging debt, you don’t only need to raise a small percentage of the total cost and you can take on projects you would never have been able.
Leveraging debt can push you ahead of your peers
Leveraging debt can propel you years ahead of your financial peers. Leveraging debt will help you to get into big business without having to labour to raise capital. Debt means that you are using other people’s hard earned money to build wealth without having to work. You grow wealth regardless of your current financial status. With good planning and execution, leveraged funds well invested are able to pay off the loan and make a profit. This reduces the time you need to work to make money for your projects.
Leveraging debt helps you build your savings
Savings are a great resource for capital mobilization, paying for assets education and holidays. However, saving enough money to finance a million dollar investment without debt can cost you a whole working life. If your plan is to save for a holiday abroad or to buy your dream car, you don’t have to forgo investments. Leveraging debt can support your investments as you concentrate on your savings plan financed by your job or another business.
Leveraging debt is not risky
Many people fear leveraging debt because they think it can lead them to bankruptcy. The fall of the American giant Lehman Brothers which sparked the financial crisis in 2008 has mainly been blamed on leveraging. Whether that be true or not, there are many examples of enterprises which have used debt prudently and gained success. Leveraging like any other venture is risky but very high in potential. A good balance between cost and returns can open the door to great opportunities to grow your financial muscle and financial freedom.