Why is Financial Leverage the Ultimate Game Changer?

Updated: Feb 15, 2020

The chart below only scratches the surface as to why financial leverage is so important. In fact it's the key driving forces behind large scale wealth. Once you reach a certain point, not using your money to acquire assets makes much more financial sense.

Leverage is encouraged by the tax code and basically bypasses the tax system.

For this reason alone, it really amplifies the results.

Also, you start with the money instead of starting from scratch. This shaves years off the build process like when you use a mortgage to buy a house instead of saving up the purchase price.

With all it's power, how could leverage cause problems?

Using to acquire risk based holdings like stocks could cause large losses.

Also, interest rate increases would increase the cost of money so you must be aware of whether or not loan is variable or fixed.

Having strong banking relationships and continuously expanding credit capacity lays the foundation of maximizing financial leverage.

In closing, financial leverage is the difference between creating comfortable or generational financial strength. The government and banking systems are ambitiously wanting to add more and more dollars to the money system via loans.

As I write this, over a trillion dollars has been added to the economy in last 12 months backed by nothing but promises. Those that use these monopoly dollars to acquire assets will be rewarded while those who don't will continue to slip further behind.

For related information on leverage and debt in the modern world, check out this video: https://www.youtube.com/watch?v=Np-kjff8Jr8&t=10s