The Value of Debt How to Manage Both Sides of a Balance Sheet to Maximize Wealth

In this groundbreaking book, author Tom Anderson argues that, despite the reflex aversion most people have to debt—an aversion that is vociferously preached by most personal finance authors—wealthy individuals and families, as well as their financial advisors, have everything to gain and nothing to lose by learning to think holistically about debt.

Anderson explains why, if strategically deployed, debt can be of enormous long-term benefit in the management of individual and family wealth. More importantly, he schools you in time-tested strategies for using debt to steadily build wealth, to generate tax-efficient retirement income, to provide a reliable source of funds in times of crisis and financial setback, and more.

• Takes a "strategic debt" approach to personal wealth management, emphasizing the need to appreciate the value of "indebted strengths" and for acquiring the tools needed to take advantage of those strengths
• Addresses how to determine your optimal debt ratio, or your debt "sweet spot"
• A companion website contains a proprietary tool for calculating your own optimal debt ratio, which enables you to develop a personal wealth balance sheet

Offering a bold new vision of debt as a strategic asset in the management of individual and family wealth, The Value of Debt is an important resource for financial advisors, wealthy families, family offices, and professional investors.

Thomas J. Anderson has an MBA from the University of Chicago and a BSBA from Washington University in St. Louis, where he majored in finance and international business. He has participated in programs at the London School of Economics, Cass Business School at City University London, ESCP Europe, and the Wharton School of the University of Pennsylvania. Tom worked in investment banking in New York before moving into private wealth management. Tom has received multiple distinctions and prominent national recognition for his wealth management accomplishments. His extensive academic studies at some of the top schools in finance and economics, international experience, and institutional background bring a unique perspective to delivering advice to the individual and on The Value of Debt.

Foreword

Acknowledgments

Introduction

Part I: The Value of Debt in the Management of Wealth

Chapter 1: Strategic Debt Philosophy—An Overview
How This Book Can Add Value to Your Life

The Five Tenets (or Action Principles) of Strategic Debt Philosophy

First Tenet:  Adopt a Holistic (Comprehensive)—Not Atomistic—Approach

Second Tenet:  Explore Thinking and Acting Like a Company

Third Tenet:  Understand Limitations on Commonly Held Views of Personal Debt

Fourth Tenet:  Set Your Sites on an Optimal Personal Debt Ratio

Fifth Tenet:  Stay Open-Minded, Ask Questions, and Verify “What Works”

Chapter 1: Summary and Checklist

Chapter 2: The Basic Idea—Limiting the Costs, the Impacts, and the Duration of Financial Distress

Risk of Financial Distress

The Direct and Indirect Costs of Financial Distress

The Impact of Financial Distress: Five Levels

The Duration of Financial Distress

The Four Indebted Strengths: A First Look

The One Thing You Must Definitely Do!

Chapter 2: Summary and Checklist

Chapter 3: Strategic Debt Practices—An Overview

Understanding and Taking Advantage of Strategic Debt Philosophy

Achieving and Maintaining an Optimal Debt Ratio

Calculating Your Debt Ratio

Should Your Primary Residence Be Included in Your Debt Ratio?

When to Pay Down Your Debt, and When Not To

Advanced Practices and Scenarios

Chapter 3: Summary and Checklist

Part II: The Assets-Based Loan Facility

Chapter 4: The Incredible Value of an Assets-Based Loan Facility (“ABLF”)

What an ABLF Is and How It Works

The Many Advantages of Having an ABLF in Place

Why Virtually Every Company Has a Line of Credit⁴

Surviving Storms and Other Natural Disasters

The Criticality of Being Proactive and Assessing Risks

Family Finances: First Bank of Mom & Dad; Eldercare Bridge Loan

Taking Advantage of Opportunities and Distressed Sales

Average ABLF Usage and the Win-Win-Win Scenario

Chapter 4: Summary and Checklist

Part III: Scenarios For Success

Chapter 5: Long-Term Wealth Amplification Through “Capturing the Spread”

The Basic Concept: Inherent Risks with Great Potential Rewards

Three Key Factors to Consider

Some Scenarios for Capturing the Spread

Synching With Your Investment Strategy

Chapter 5: Summary and Checklist

Chapter 6: Holistic Financing of the Expensive Things You Need and Want

A Better Way to Buy: In the Company of Holistic Financial Thinkers

Four Principles When Financing the Purchase of a Desired Item

A Better Way to Purchase a Vehicle (or Almost Anything Else)

Purchasing a Second Home: Plusses and Minuses

100% Financing: The No Down Payment Real Estate Purchase Option

Chapter 6: Summary and Checklist

Chapter 7: Generating Tax-Favored Income in Retirement or Divorce:  Introduction: Three Goals (and Some Disclaimers)

An Opening Scenario for Generating Tax-Free Income in Retirement

A Better Alternative to a Familiar Story

A Better Investment: Enhanced Leverage and the Freedom to Choose

Revisiting Tax Issues

Making Use of Strategic Debt Strategies and Practices in Divorce

Chapter 7: Summary and Checklist

Part IV: Conclusion

Chapter 8: Conclusion

What This Book Is Really About

What We Hope You Have Taken Away

Strategic Debt as a Financial Engine Over the Decades

Paradoxes of Plenty: Some Surprises in Maintaining an Ideal Debt Ratio

Investing In the Future: A Cautionary Reminder

A Final Thought

Chapter 8 Summary: A Recap of the Book’s Significant Lessons

Part V: Appendices

Appendix 1: The Varieties of Debt

Appendix 2: Strategic Debt Practice for the Young  and Those With Limited Assets

Appendix 3: No Guarantees—Limiting the Risks of Investing in a Crazy World

Appendix 4: Some Examples of Ideal Debt Ratios

Glossary

Bibliography

About the Author

About the Companion Website

Index

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