Robert Kiyosaki Reveals How to Get Rich from Debt

Debt is often viewed as a negative aspect of personal finance. However, investor and author Robert Kiyosaki offers a different perspective on the potential positive side of using debt. He explains that there are specific methods to generate profits by leveraging debt. This strategy focuses on using loans as a productive financial instrument. As an initial step, it is essential to understand the fundamental difference between good debt and bad debt. This core understanding forms the primary foundation before applying debt utilisation strategies in investment activities. Most people consider debt to be bad. But according to Robert, that is not true. “The new rules of money require debt if you want to get rich. The condition is that it must be good debt,” writes the author of the book ‘Rich Dad Poor Dad’. Meanwhile, bad debt according to Kiyosaki is borrowing used for liabilities, such as financing cars and holidays, because these are not priority needs and their value depreciates over time. In contrast, good debt is used to purchase assets that bring cash income into one’s pocket every month. Such smooth loans include, for example, loans for investment properties, venture capital, etc. “This is a form of good debt. You need high financial intelligence to use it correctly, but when you do, you can print money faster,” he says. Here is an example of a scheme for making money through debt à la Robert Kiyosaki: The purchase price of one property asset is US$100,000. Then, this bill is paid using a loan of US$80,000 with 5% interest. The remainder, US$20,000, is paid in cash from personal funds. If calculated using a simple mortgage calculator, the annual cost for this loan is around US$8,500. If it is assumed that the income from this property is worth US$11,000 per year, after expenses are paid, the total net income received becomes US$2,500 (US$11,000 - US$8,500). Thus, the investment return from this scheme is US$2,500 divided by US$20,000, or 12.5%. According to Kiyosaki, this 12.5% profit is above the average return from conventional investment styles.