Have you heard the phrase?
“Debt is the root of all evils. Never get into Debt.”
Debt is slavery, which is valid to a certain extent because when you’re drowning in Debt, your life is over while you’re trying to pay your debts and are not waiting for you!
They’re growing day by day; the united states have embraced that total U.S. consumer debt is almost 15 trillion dollars which brings the average household debt to over $5,300.
It might sound a bit confusing because why would anyone with a lot of money use debts in the first place Debt be supposed to be used by people who do not have money? That’s not how capitalism works.
That is a powerful tool if you know how to use it, and in this article, you will find out How Rich women Makes Money With Debt?, so let’s get right into this!
How Rich women Makes Money With Debt?
In order to understand how rich women are making money, let’s take a look at how people with deep pockets still use Debt to make even better money?
Most of the Trade is Based on Debt
It might sound a bit controversial because borrowing money to start a business is a horrible idea, and personally, I would never do that, but there are businesses, especially traditional businesses, where using that is your best option.
Let’s say you want to sell pens. It’s a very common product, and there’s pretty much always a demand for it. Ideally, you would fly to china to find a factory that produces that kind of pen with good quality and at the right price.
You would purchase a container of pens and ship them to us and distribute them to your clients, but today that’s mostly done online through websites like Amazon.
Unless it’s a more complicated product where you have to fly to that factory, but here is the catch you don’t really have to pay for the products to have the product first; let me explain how in the past 50 years?
China has become the factory of the world, producing everything literally; thousands of factories work non-stop to produce everything that the world needs in order to make it easier to sell.
Most of these factories would gladly loan you their products in return that you would pay them some time in the future; of course, they would not lend to strangers, so you will have to build some kind of trust with them first, But that’s how business has been running for the past 50 years.
1. Sales Skill:
Once the client sells the product in the U.S. or any other part of the world, he would pay the factory and borrow more products.
You’re basically telling the factory you know how to produce it, so let me help you sell it if I can sell it for anything above this price.
That’s going to be my profit; what makes this strategy great is that you’re not tying up your own money in this transaction; that’s why selling is one of the greatest skills you can ever master.
Refinancing real estate debts is the best kind of Debt because it’s filled with loopholes. If you don’t have a mortgage, then you’re paying extra taxes.
Rich people always have multiple mortgages to be able to get all of those deductions; remember every dollar that you are supposed to pay in taxes, but instead, you save an extra dollar earned.
So that’s another way rich people get richer but let me give you a more practical way this is how basically rich people get rich in real estate.
There are lots of Job opportunities in Real estate; however, you don’t have to go for actually; all you will get is a passive income, so if you are interested, then you can also look at our article on Best Paying Jobs in Real Estate Investment Trusts.
Let’s say you saved $2000; that’s a lot of money, but if we’re going, being honest, that’s peanuts; you can’t even buy a house, of course, you can’t get a mortgage up to $800,000 since you have to make a 20 down payment.
But here is the secret let’s say you find a property that costs half a million dollars. It’s in bad condition and needs some or maybe a lot of renovation; you head to a bank and get a mortgage by making a 20 down payment.
Let’s say you’re going to spend around 10 of the total cost of the house to renovate it or around $50,000; you head to your bank again, but this time to refinance your mortgage.
When you got your first mortgage, the value of that property was just half a million dollars because it was in such a bad condition that no one wanted to live there.
But since you have renovated it now, there are people who want to rent it out, so the market value of that property, let’s say, rises to $700,000 like the first time.
Let’s say you’re going to get an 80% mortgage, but eighty percent out of seven hundred thousand dollars is 560,000.
$400,000 out of that money is going to go to the first bank that gave you the first mortgage, and let’s deduct another 50,000 that you spent on renovation, and you’re going to be left with an extra profit of 110,000 dollars.
And you’re left with a property that you can rent out to build equity and generate passive income; on top of that, you are going to avoid paying taxes because you have a mortgage; this is a very common practice among real estate investors.
3. Hedge funds:
Hedge funds are made by the rich for the rich to make rich people richer, and they usually use unpopular strategies mortal people like me and you.
We do our best to predict which companies are going to grow and rise in value and invest the money we work so hard to earn in hopes for these companies to grow.
But hedge funds often use a completely opposite strategy; they try to make money when companies fall or go bankrupt, as was with the case of GameStop.
Although, in that case, the internet challenged hedge funds and pushed them to lose over 13 billion dollars, how do hedge funds make money with Debt?
Let’s say you expect a certain stock to decline like Facebook because you know that apple produces the most popular smartphone, and you will announce next week that they will no longer let apps track you like Facebook or Instagram.
Track your online activity and make privacy their first priority, which will greatly damage facebook’s business model, so you pick up your phone and call your broker to borrow from him a single facebook stock that costs, let’s say, $100 and instantly sell it in the open market for a $100.
Congrats, now you have a hundred dollars in your pocket, but you still owe your broker one facebook stock; let’s say you are right, and next week Facebook stock price drops to 70 dollars; you use that hundred dollars to buy one Facebook stock for 70 dollars.
Since the price dropped and returned it to your broker and pocket the difference, congrats, you’ve made 30 out of a full of stock; it sounds simple in theory. But it’s extremely difficult and risky in practice.
The stock price can rise indefinitely, but if you have a hundred analysts working for you, you can make a fortune using this strategy, you can get best stock investing advice in our article on Stash App Investing and Tellus App Review to start your successfull investing journey!
Forex is a market where currencies are traded. It makes international trade possible; you can use the U.S. dollar in china; you have to buy Chinese yen to pay your employees.
For example: In china so there is a market where anyone or any company can come in and purchase foreign currencies, and based on different factors, these currencies fluctuate.
- the fed raises
- interest rates that will limit the
- supply of dollars in the market
And make the U.S. dollar stronger against other currencies or vice versa, so if you can predict which currencies will rise or fall, you can make a lot of money in this market.
5. Credit score:
As you can see, that is a powerful tool every successful business company or entrepreneur uses in various ways, especially if you have a proven business model of borrowing money to finance the purchase orders is practiced pretty much by every business.
So stop thinking in terms of all that is bad; of course, debts with a high-interest rate, such as credit card debts, are horrible, but in order to get a lower interest rate, you have to minimize the risks of loaning you money.
The U.S. GDP is a little over 21 trillion dollars, meaning the entire economy consists of that, but I am sure after reading this article, you may have a clear idea of How Rich women Makes Money With Debt?.