Debt-Free or Leveraged Wealth: How to Choose the Right Path for Your Financial Goals

Posted by Abby Torres on January 14, 2025 at 8:00 AM

When it comes to personal finance, two competing schools of thought often dominate the conversation. On one side, you have the Dave Ramseys of the world, who encourage living completely debt-free. On the other, proponents like Grant Cardone and Robert Kiyosaki argue that leveraging debt is the key to building substantial wealth. Which one is right? The truth is that both approaches can work, but the right choice depends entirely on you.

Debt-Free or Leveraged Wealth- How to Choose the Right Path for Your Financial Goals

Dave Ramsey’s method is simple and appealing: eliminate all debt. It’s a straightforward path to financial peace, free from loans, credit card bills, and the mental burden of owing money. For many, this approach provides stability and a stress-free lifestyle. If your goal is to live a modest, uncomplicated life and avoid financial risk, this method is incredibly effective. Debt-free living gives you control over your expenses, reduces financial anxiety, and offers a clear sense of freedom. It’s about simplicity, earning, saving, and spending within your means.

However, not everyone wants to settle for a life of financial minimalism. For those who want to build wealth, grow businesses, or scale their investments, leveraging debt becomes a powerful tool. Grant Cardone, Robert Kiyosaki, and other advocates of “good debt” argue that borrowing money to invest, whether in real estate, businesses, or other appreciating assets, can accelerate your path to financial success. Instead of saving for decades to buy a property in cash, you can finance it, let the asset generate income, and use that cash flow to pay off the loan while growing your net worth.

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But this approach isn’t without its challenges. The overlooked cost of leveraging debt is stress. High levels of debt bring pressure to meet loan payments, navigate market fluctuations, and manage risks. It’s not a strategy for everyone. It requires discipline, planning, and the ability to remain level-headed under financial strain. Without the right mindset and character, leveraging debt can quickly spiral into financial disaster.

So how do you decide which approach is right for you? Start by looking at your personal character, risk tolerance, and goals. If you’re someone who values stability, dislikes financial uncertainty, and sleeps better knowing you owe nothing to anyone, then Ramsey’s debt-free method may align with your values. You can still build wealth through diligent saving, investing in low-risk assets, and maintaining a disciplined financial plan.

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On the other hand, if you’re driven to build something bigger, whether it’s a business, a real estate portfolio, or a large investment portfolio, then strategically using debt can help you scale faster. But you need a clear plan. Leveraging debt without preparation, education, or discipline is a recipe for failure. Before taking on significant loans, ensure you understand the risks, cash flow requirements, and long-term goals of the investment.

Both methods require commitment and a willingness to make sacrifices. Debt-free living often means saying no to luxuries in the short term to achieve long-term financial security. Leveraging debt requires embracing a certain level of financial stress and responsibility to make it work for you. Neither option is “easier,” but both can lead to success when matched to the right individual.

The key is understanding what you want out of life and being honest about your capacity to handle risk. Do you thrive under pressure, or does financial uncertainty keep you awake at night? Are you committed to self-discipline, education, and planning? Your answers will determine which path is best suited for you.

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Ultimately, there’s no universal right or wrong approach to debt. The correct choice is the one that aligns with your personal values, goals, and ability to execute a plan. For some, financial freedom comes from living simply and staying debt-free. For others, it’s found in leveraging resources to build wealth on a larger scale.

What matters most is being intentional with your financial decisions. Whether you choose the security of a debt-free lifestyle or the opportunity that comes with leveraging debt, both paths require effort, commitment, and clarity of purpose. The real danger lies in choosing neither, staying stuck, uncommitted, and letting your financial life happen to you instead of taking control.

Take the time to evaluate where you are, what you want, and what financial strategy aligns with your vision. Debt can be a burden or a tool, it’s up to you to decide which it will be. Choose wisely, plan carefully, and own the path you take.

 


 

Topics: Savvy Brokers, Savvy Brokers - Personal Finance