ANew York Times bestseller and one of the Ten Best Business Books of 2013 byWealthManagement.com, this book brings a new vision of the value of debt in the management of individual and family wealthIn this groundbreaking book, author Tom Anderson argues that, despite the reflex aversion most people have to debtan aversion that is vociferously preached by most personal finance authorswealthy individuals and families, as well as their financial advisors, have everything to gain and nothing to lose by learning to think holistically about debt.
Anderson explains why, if strategically deployed, debt can be of enormous long-term benefit in the management of individual and family wealth. More importantly, he schools you in time-tested strategies for using debt to steadily build wealth, to generate tax-efficient retirement income, to provide a reliable source of funds in times of crisis and financial setback, and more.
Takes a "strategic debt" approach to personal wealth management, emphasizing the need to appreciate the value of "indebted strengths" and for acquiring the tools needed to take advantage of those strengthsAddresses how to determine your optimal debt ratio, or your debt "sweet spot"A companion website contains a proprietary tool for calculating your own optimal debt ratio, which enables you to develop a personal wealth balance sheet
Offering a bold new vision of debt as a strategic asset in the management of individual and family wealth,The Value of Debt is an important resource for financial advisors, wealthy families, family offices, and professional investors.
Foreword xi
Acknowledgments xv
Introduction xvii
Part 1: The Value of Debt in the Management of Wealth 1
Chapter 1: Strategic Debt Philosophy: An Overview 3
How This Book Can Add Value to Your Life 3
The Five Tenets (or Action Principles) of Strategic Debt Philosophy 4
Chapter 1: Summary and Checklist 14
Chapter 2: The Basic Idea: Limiting the Costs, the Impacts, and the Duration of Financial Distress 21
Risk of Financial Distress 22
The Direct and Indirect Costs of Financial Distress 23
The Impact of Financial Distress: Five Levels 24
The Duration of Financial Distress 25
The Four Indebted Strengths: A First Look 26
The One Thing You Must Consider! 26
Chapter 2: Summary and Checklist 29
Chapter 3: Strategic Debt Practices: An Overview 33
Understanding and Taking Advantage of Strategic Debt Philosophy 34
Achieving and Maintaining an Optimal Debt-to-Asset Ratio 37
Calculating Your Debt-to-Asset Ratio 41
Should Your Primary Residence Be Included in Your Debt Ratio? 43
When to Pay Down Your Debt, and When Not To 45
Advanced Practices and Scenarios 47
Chapter 3: Summary and Checklist 49
Part 2: The Assets-Based Loan Facility 53
Chapter 4: The Value of an Assets-Based Loan Facility (ABLF) 55
What an ABLF is and How It Works 56
The Many Advantages of Having an ABLF in Place 59
Why Virtually Every Company Has a Line of Credit 61
Surviving Storms and Other Natural Disasters 62
The Criticality of Being Proactive and Assessing Risks 64
Family Finances: First Bank of Mom and Dad; Elder Care Bridge Loan 67
Taking Advantage of Opportunities and Distressed Sales 68
Average ABLF Usage and the Win-Win-Win Scenario 70
Chapter 4: Summary and Checklist 71
Part 3: Scenarios for Success 75
Chapter 5: Long-Term Wealth Amplification through Capturing the Spread 77
The Basic Concept: Inherent Risks with Great Potential Rewards 77
Three Key Factors to Consider 79
Some Scenarios for Capturing the Spread 83
Synching with Your Investment Strategy 93
Chapter 5: Summary and Checklist 93
Chapter 6: Holistic Financing of the Expensive Things You Need and Want 99
A Better Way to Buy: In the Company of Holistic Financial Thinkers 99
Four Principles When Financing the Purchase of a Desired Item 100
A Better Way to Purchase a Vehicle (or Almost Anything Else) 108
Purchasing a Second Home: Pluses and Minuses 111
100 Percent Financing: The No Down Payment Real Estate Purchase Option 117
Chapter 6: Summary and Checklist 119
Chapter 7: Generating Tax-Efficient Income in Retirement or Divorce 123
Introduction: Three Goals (and Some Disclaimers) 123
An Opening Scenario for No Taxes in Retirement 124
Borrowing Versus Selling to Access Your Money 125
A Better Alternative to a Familiar Story 127
Tying It Back to Capturing the Spread 128
Revisiting Tax Issues 130
Making Use of Strategic Debt Strategies and Practices in Divorce 138
Chapter 7: Summary and Checklist 143
Chapter 8: Conclusion: What This Book is Really About 149
What We Hope You Have Taken Away 150
Strategic Debt as a Financial Engine over the Decades 153
Paradoxes of Plenty: Some Surprises in Maintaining an Ideal Debt Ratio 158
Investing in the Future: A Cautionary Reminder 162
A Final Thought 164
Chapter 8 Summary: A Recap of the Books Significant Lessons 164
Part 4: Appendixes 169
Appendix A: The Varieties of Debt 171
Appendix B: Strategic Debt Practice for the Young and Those with Limited Assets 175
Appendix C: No Guarantees: Limiting the Risks of Investing in a Crazy World 185
Appendix D: Some Examples of Ideal Debt Ratios 209
Glossary 225
Bibliography 229
About the Author 231
About the Companion Website 233
Index 235
