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

by Thomas J. Anderson (Author)

A New York Times bestseller and one of the Ten Best Business Books of 2013 by WealthManagement.com, this book brings a new vision of the value of debt in the management of individual and family 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.

Front Jacket

Virtually every CFO of a large company recognizes that both assets and debts can be sources of financial strength. Yet the vast majority of high-net-worth individuals are either perilously over-leveraged or, more commonly, tragically under-leveraged.

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, the way CFOs do.

Viewing amortization as the enemy of good financial sense, with only a few notable exceptions, 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.

Taking a Strategic Debt approach to personal wealth management, he emphasizes the need to appreciate the value of "Indebted Strengths" and for acquiring the tools needed to take advantage of those strengths for increased liquidity, flexibility, leverage, and survivability.

But, as he explains, before you can begin to leverage your indebted strengths, you must first determine your optimal debt ratio, or what he refers to as your debt "sweet spot." To that end, he describes methods CFOs use to determine their companies' debt sweet spots, and he shows you how to apply those methods in finding yours.

Anderson then supplies you with a set of advanced techniques for leveraging your indebted strengths, including:

• Capturing the spread, or, in other words, profiting from the difference between the value of an investment and cost of the debt incurred to make it
• A discussion on second homes (including renting versus buying) and a framework for how much of a second home you can afford (and how much of it should be financed)
• Better ways to purchase and finance cars, boats, and luxury items
• How you can help your children and grandchildren by using your balance sheet
• How access to the right kind of debt can help you and your family be better prepared for an emergency
• The best way to do eldercare transitions including bridge loans for you or someone in your family
• Alternative means of financing home improvements, college, real estate, raw land, and business investments
• Ways to create tax-favored income in retirement and divorce

In The Value of Debt, Anderson proves that all else being equal, a lower volatility portfolio with some debt is better than a high-volatility portfolio with no debt. He also takes a balanced approach and has an in-depth discussion of the risks inherent in this strategy. This includes an overview of the different economic environments we could face and base case scenarios that all investors should be aware of.

In addition, on The Value of Debt companion website you'll find a proprietary tool for calculating your own optimal debt ratio. With inputs for assets and liabilities, it enables you to develop your personal wealth balance sheet and to compare it to examples provided by the author.

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.

Back Jacket

Virtually every CFO of a large company recognizes that both assets and debts can be sources of financial strength. Yet the vast majority of high-net-worth individuals are either perilously over-leveraged or, more commonly, tragically under-leveraged.

In this groundbreaking book, author Tom Anderson argues that, despite the reflex aversion most people have to debt, 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, the way CFOs do.

Viewing amortization as the enemy of good financial sense, with only a few notable exceptions, 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.

Taking a Strategic Debt approach to personal wealth management, he emphasizes the need to appreciate the value of "Indebted Strengths" and for acquiring the tools needed to take advantage of those strengths for increased liquidity, flexibility, leverage, and survivability.

But, as he explains, before you can begin to leverage your indebted strengths, you must first determine your optimal debt ratio, or what he refers to as your debt "sweet spot." To that end, he describes methods CFOs use to determine their companies' debt sweet spots, and he shows you how to apply those methods in finding yours.

Anderson then supplies you with a set of advanced techniques for leveraging your indebted strengths, including:

• Capturing the spread, or, in other words, profiting from the difference between the value of an investment and cost of the debt incurred to make it
• A discussion on second homes (including renting versus buying) and a framework for how much of a second home you can afford (and how much of it should be financed)
• Better ways to purchase and finance cars, boats, and luxury items
• How you can help your children and grandchildren by using your balance sheet
• How access to the right kind of debt can help you and your family be better prepared for an emergency
• The best way to do eldercare transitions including bridge loans for you or someone in your family
• Alternative means of financing home improvements, college, real estate, raw land, and business investments
• Ways to create tax-favored income in retirement and divorce

In addition, on The Value of Debt companion website you'll find a proprietary tool for calculating your own optimal debt ratio. With inputs for assets and liabilities, it enables you to develop your personal wealth balance sheet and to compare it to examples provided by the author.

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.

Author Biography

THOMAS J. ANDERSON worked in investment banking in New York before moving into private wealth management. 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.