I was chatting with a friend recently about how having kids made him a better employee. His motivation to provide for his children pushed him to work harder than ever. He mentioned that before he had kids, he could barely make ends meet, but now he’s making more money than ever, enough to support his family, own a big car, and even take vacations to the US or exotic locations.
When it comes to my investments, I have a similar mindset. While some might avoid having kids due to financial concerns or rely on welfare, others trust their ability to provide once the children arrive. That’s a belief I share; I trusted myself to manage and grow my investments despite potential obstacles.
I decided to go into debt to invest. Right after college, with some savings in hand, I bought my first rental property outright. I tried to get a loan to buy a larger property, but banks were unwilling since I was about to take a year-long trip around the world and couldn’t provide steady income proof. If I had worked just a few months post-graduation, I might have secured a mortgage and benefited greatly from Paris’s property market boom. The property I bought in 2003 did double in value by the time I sold it last year, but back then, I prioritized traveling and stayed debt-free initially.
A few years later, once I had stable employment, I started taking on debt to build my wealth. I bought a second property and even took out consumer loans and utilized 0% balance transfer options (with a small fee) to invest. This made me work even harder to pay off those loans every month. Now, that second property is rented out and generating positive cash flow, covering my last consumer loans. However, when I was living there, finding money to make payments was a constant challenge.
I borrowed money from my mom and an old friend because banks deemed my debt-to-income ratio too high. I never used borrowed funds for luxuries like vacations, cars, or fancy clothes. I believed in my investments’ potential and knew I could repay the loans, even if the investments took longer to pay off than expected.
Taking those loans allowed me to enter the market earlier, and the interest I paid was minimal compared to the possible returns. Even with some investments failing, I saw it as a risk worth taking to accelerate my wealth-building. I had confidence in my ability to generate more income, knowing that the pressure of repaying loans would push me harder. While banks might have seen my debt as too high, they didn’t account for my work bonuses or multiple side hustles, which consistently proved I could manage.
I had several backup plans in place. On top of my 9 to 5 job, I tutored, wrote for travel blogs, translated websites for friends, and waitressed at weddings. At any given time, I had multiple income streams. I also took on roommates to share expenses. My main expenses were food and travel, significantly covered by my travel writing jobs, allowing me to dedicate most of my money to repaying loans. My robust strategy enabled me to pay off loans quickly, except for a final consumer loan with steep early repayment penalties, though I’ve already profited beyond its principal and interest over its term.
This aggressive approach allowed me to leave my day job three years ago and rely entirely on my investments by the time I was 30. I spent 2011 and 2012 traveling and bought a house in Guatemala last year with cash.
In essence, I believe in using debt to create wealth. While it’s risky, it enabled me to build wealth faster and achieve financial independence sooner. Without that strategy, I might have settled for a slower, more relaxed approach to financial growth.
What do you think about going into debt to invest?