Hey guys,
Punit here,
Welcome back!
On the last date, I mean blog, we understood about debt. If you haven't read it already, I would like you to 1st read it and then read this. Click Here
This time the blog is not just passive reading, I have attached YouTube and Instagram videos, which will help you better understand the topic.
Do you ever wonder how wealthy people become even wealthier?
Kunal Shah - https://youtube.com/shorts/OssDGKAk5oI?feature=share
The answer lies in their ability to leverage other people's money. While borrowing money may seem unconventional, it's a strategy that many successful individuals and businesses use to build their fortunes.
Take, for example, Tata, Adani, and Ambani, all of whom have accumulated vast amounts of wealth through their companies, such as TCS, Adani Enterprises, and Reliance Industries. Despite their already sizable fortunes, they continue to borrow money to grow their businesses and invest in new ventures.
Here is the data of how much debt each company has
By borrowing money, they can take advantage of opportunities that would otherwise be out of reach. They can invest in assets and businesses that generate more income than the interest they pay on their loans. This is a strategic move that allows them to make their money work for them, rather than the other way around.
How can an individual use debt for generating wealth?
Let's say you want to invest in a car for 10 lakh. You have 5 lakh saved up, but you don't want to use all of your savings to purchase the car. Instead, you decide to borrow the remaining 5 lakh from a bank at an interest rate of 8%.
You use the 10 lakh to purchase the car and rent it out to car rental apps like Zoomcar for 1,000 per day. Assuming the car is rented out for 20 days a month, you earn 20,000 in rental income, which is enough to cover the car loan instalment, insurance, and maintenance costs. Over the course of a year, you earn 2.4 lakh in rental income, which is a 24% return on your initial investment of 10 lakh.
Meanwhile, you're paying the bank 40,000 in interest over the course of the year, which is an 8% return on the 5 lakh you borrowed. After accounting for the interest payments, you're left with a net profit of 2 lakh for the year.
Now, imagine you had used only your savings to purchase the car. You would have earned a 24% return on your investment, but it would have been a smaller amount (1.2 lakh) and you would have no savings left over. By borrowing money, you were able to achieve a higher return on your investment, while still keeping some money in the bank for emergencies.
Of course, this is a simplified example, and there are risks involved in borrowing money to invest. The key to successfully borrowing money is to take calculated risks and use your expertise to make informed investment decisions. When done right, borrowing can lead to significant returns and help you build wealth over time.
To better understand this concept, check out the attached YouTube and Instagram videos featuring Kunal Shah and Robert T. Kiyosaki. They provide valuable insights and inspiration that can help you take your finances to the next level.
Robert T. Kiyosaki - https://www.instagram.com/reel/ChfV5oBDyLD/?igshid=OGQ2MjdiOTE=
Don't be afraid to borrow money to achieve your financial goals. By using other people's money wisely, you can create wealth and achieve financial independence.
Here is a comprehensive video of Robert T. Kiyosaki - https://youtu.be/dN5qHjnd_xk
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