Yep, that’s right.  I have no intention of paying off this debt any time soon. For all I care, the bank I’m indebted to can continue to milk me for interest for many more years to come.

The above statements may sound a bit insane, but don’t call the asylum truck on me just yet.  Now that I have your attention, I’d like to elaborate more on why I would say such craziness.

To illustrate the rationale here, allow me to start with a simple example.  As I elaborate in my tutorial on free money, you can make money by putting all your purchases on a cash back credit card.  By paying off your credit card off in full, the bank is effectively giving you a renewable 0% loan each month.  So while you’re using the credit card bank’s money for 30 days, your money is busy earning you 3.50% APY interest in an online savings account.   So each month, you’re borrowing money at 0% to make a 3.50% APY return.  This strategy is a form of leverage and is the model upon which banks are based — using money at one rate to earn a higher return on that money somewhere else.  The difference is profit.

In my case, I borrowed $24,000 a couple years ago to purchase an income-producing asset.  That investment now produces monthly revenue of $670 and is still growing.  The debt costs me $85 a month.  After debt service is paid, this asset cash flows $585 per month.  This is a passive income stream I would not have otherwise had without borrowing the money, because at the time I didn’t have $24K in uncommitted cash just laying around looking for something to do.

On a future post I’ll talk about the particulars of this investment, however to keep things on topic, there are a couple points I want to highlight here: continue

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