How Debt Can Actually Create Income: Insights From Robert Kiyosaki

In a recent “Millennial Money” episode, Robert Kiyosaki, a dynamic entrepreneur, addresses a pivotal issue resonating with his contemporaries: the journey towards financial independence.

His frank and insightful conversation delves into the subtleties of achieving financial freedom, a quest that can mark the difference between enduring success and ongoing challenges.

Here’s the complete rundown on his strategy.

Good vs. Bad Debt

The conversation started with a basic question: Is all debt a bad thing?

In regular schools, they usually teach that debt is not good, but Alexandra found out from seminars and her own experiences that not all debt is the same.

There’s a simple difference between ‘good debt’ and ‘bad debt,’ which can be hard for many young adults to understand.

The Perils of Student Loan Debt

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Image Credit: Andrey_Popov/Shutterstock.

The conversation mainly centered around student loans, which are often seen as “bad debt.” ¹

Unlike some other debts, student loans are quite tough to get rid of, and they stay with you for a long time because you can’t erase them through bankruptcy.

When students switch majors or leave school, it makes the problem of student loan debt even worse, causing both financial and emotional difficulties. This can lead to stress and worry for individuals who find themselves struggling to manage their student loan obligations, impacting their overall well-being and financial stability.

It’s essential to carefully consider the implications of taking on student loan debt and plan accordingly to minimize its long-term impact.

The Struggle of Choosing a Career Path

Alexandra shared stories of friends burdened by massive student loan debts, some as high as $500,000. These debts not only influence career choices but also personal life decisions, like starting a family.

The conversation highlighted the importance of making informed decisions about education and career paths, considering the long-term financial implications.

Emphasizing how student loan debts can be a significant source of stress and hinder one’s ability to achieve financial goals, making it essential for individuals to explore affordable education options and carefully assess their financial prospects before committing to a specific academic path.

The Role of Debt In Wealth Building

The episode then focused on a more positive side of debt: how it can help you build wealth.

They talked about “good debt,” which is debt that makes you money. They used real estate investments as an example, where borrowing money can lead to making more money.

Alexandra’s mentor shared his own story, starting with a small condo that made a little money and then moving on to owning thousands of properties with the help of borrowed money.

The Heart of Good Debt

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Image Credit: shisu_ka/Shutterstock.

The key to good debt ²  is understanding cash flow. When you use debt to invest in something like a rental property or a business, it’s considered good debt if that investment generates more money than it costs, including the loan payments.

This means the income from the investment covers the expenses and leaves you with some extra. This principle applies to various investments, including rental properties and even businesses.

It’s all about making sure the money you borrow ends up working for you and adding to your financial well-being.

Navigating a Complex Financial Landscape

The episode concluded with a reflection on the unique challenges faced by millennials in today’s economy.

With fewer job opportunities, rising costs of living, and the advent of artificial intelligence replacing traditional jobs, millennials must be smarter and more strategic in their financial decisions. They need to find ways to adapt and thrive in a rapidly changing job market while also managing their finances wisely.

This includes saving, investing, and budgeting effectively to secure their financial future amidst these economic challenges.

Utilizing Debt to Build Wealth

Debt, often perceived negatively, can be a strategic tool for achieving financial goals. Good debt, as opposed to bad debt, helps build long-term wealth.

For instance, student loans are considered good debt due to the potential for higher earnings. Mortgages, another form of good debt, offer the dual benefits of home equity and potential tax advantages.

Leveraged investing and using loans to diversify investment portfolios are also seen as good debt strategies. These methods can amplify returns or create a more balanced investment approach, respectively.

The Basics & Types of Debt

Debt is an obligation owed by one party to another, commonly used for significant purchases like homes or education.

It can be secured (backed by collateral) or unsecured, and it may have a fixed end date or be revolving, like credit cards. Common forms of debt include mortgages, auto loans, personal loans, and credit cards.

While debt can provide opportunities and conveniences, it also carries risks. Excessive debt can lead to financial strain for both individuals and businesses.

Effective debt management involves understanding one’s credit utilization ratio and prioritizing high-interest debts for repayment.

Debt as a Tool, Not a Burden

It’s evident that understanding debt is crucial in various aspects of life, including home improvement projects.

“Millennial Money” plays an important role in teaching and encouraging young adults to see debt as a way to improve their finances, not just a problem.

By learning about the differences between good and bad debt and making smart choices, millennials can manage their money well and succeed in the complex financial world.


Martha A. Lavallie
Martha A. Lavallie
Author & Editor | + posts

Martha is a journalist with close to a decade of experience in uncovering and reporting on the most compelling stories of our time. Passionate about staying ahead of the curve, she specializes in shedding light on trending topics and captivating global narratives. Her insightful articles have garnered acclaim, making her a trusted voice in today's dynamic media landscape.