Before I even contemplate whether this is possible, this is a very famous theory in Tai Ji, especially in push hands. The proverbial “4 ounces move 1000 pounds” (四两拨千斤) is so pervasive in the Tai Ji world, and yet, I’ve only started to understand the power of this in the “real” world – the world of finance and economics.
I’ve never thought of debt as a good thing. Owing someone anything is bad, or so the teaching goes. So, throughout my life, I’ve been avoiding the possibility of debt. Yet, we go into debt all the time, the credit cards, the car loan, the mortgage, the favour to someone. If 4 ounces can move 1000 pounds, why not use the little money we have to leverage the big money out there?
That is what Robert Kiyosaki is saying in Retire Young, Retire Rich. I have to say, I’m still feeling uneasy on this topic. I’ve never thought that I could be going into debt, and yet if the Tai Ji theory has been useful for different situations in my life, why can’t I accept this theory of leveraging in my personal finance as well? The companies do it. Companies issue I.O.U.s so that they can leverage on other people’s money to grow their business. The government does the same thing. They too issue I.O.U.s so that they can put those money into other uses, like building roads and bridges.
The question is then “why not” instead of “why”.
I don’t like debt. I’m now being challenged as to why I don’t like debt. The more I think of it, there’s no strong reason why I don’t like debt. It’s a choice of not wanting to be in debt. If I were to save and save from my income, I may be able to retire at some point, but I won’t be able to retire early. Debt allows me to make early retirement possible. It’s not a certainty, but it’s more possible if managed correctly.
So if using a bit of debt can allow me to retire early, why resist it? The power of leveraging is more pervasive than I thought. Have you used the power of leveraging lately?
p/s: found an interesting article on moving 1000 pounds with 4 ounces. Do read.
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3 Comments
It’s a personal choice I believe, whether you want to be in debt or not. I’m not sure what kind of advice Kiyosaki’s book is trying impart, but I’m guessing that it is to borrow to invest?
I personally do not like to be in debt as well. Credit card purchases, instalment payments on larger household appliances and other small debts are fine. At least for these forms of debt, I have over its repayment.
But if the book is trying to tell you to borrow to invest in large sums on something that has the potential to yield high returns but also has the risk of falling below the capital invested, then I don’t think that’s right. As we can bear witness in the current environment, markets are never predictable. Even the largest, most secure corporations can collapse in a day. I’m not willing to bet my life savings or borrow to take that kind of risk.
I guess I’m not gonna retire young OR rich.
but financial independence is so alluring… it seems to have a romantic kind of freedom to it. if for this reason, will you still make the same choice?
The romanticism of financial independence may cloud one’s judgement with dreams of money falling from the sky. (Is this a good time to mention the Mini-bonds saga? Hehe.)
I believe in taking calculated risks, of course, and that’s how many people have retired rich and retired early. If you have a good business idea with proper planning, by all means go ahead… totally support you.