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Most people see credit as something to escape. However, the wealthy see it as an engine that fuels opportunity. While financial advisors often warn against debt, affluent individuals use it to grow their wealth, maintain liquidity and minimize taxes — all without selling their assets.

At its core, credit is borrowed money that must be repaid, usually with interest. But when used strategically, it allows access to assets that appreciate over time, create income, or offer leverage for even bigger gains. The difference between the average borrower and the wealthy one is how they manage risk and structure their borrowing.

The Power of Good Debt

The wealthy understand the distinction between good debt and bad debt. Good debt is tied to an asset that appreciates or produces income — like real estate, a business or investments. Meanwhile, bad debt funds consumption that doesn’t generate returns, such as luxury purchases or high-interest credit card balances.

Take real estate, for example. Borrowing to buy property can significantly increase returns over time. As the property’s value rises, owners build equity — wealth that can later be tapped again through loans or refinancing. The same logic applies when borrowing to buy or expand a business. If the borrowed funds generate profits exceeding the cost of the loan, the debt is effectively paying for itself.

Debt consolidation is another subtle wealth tactic. By rolling high-interest loans into one lower-rate debt, the wealthy reduce interest costs, freeing up more cash for investments rather than repayments.

Borrowing to Invest

For seasoned investors, borrowing isn’t just about convenience; it’s about leverage. Using debt to amplify returns is a well-established strategy. Margin investing, for instance, allows investors to borrow funds from brokers to purchase more stocks than their cash alone would allow. When markets perform well, returns multiply; when they don’t, the losses do, too.

Some wealthy investors also use leveraged exchange-traded funds (ETFs), hedge funds, and even short selling to profit from market movements. These strategies come with heightened risk, but they’re deployed carefully, often as part of a broader portfolio designed to manage volatility.

Then there’s foreign exchange (forex) trading, where investors control large positions with relatively little capital. The upside potential is huge, so is the risk — proving that for the wealthy, the secret isn’t just using credit, but mastering its discipline.

The “Buy, Borrow, Die” Strategy

Perhaps the most powerful and controversial way the rich use credit is through the “buy, borrow, die” approach, a tax-efficient strategy that allows them to live luxuriously while minimizing what they owe the IRS.

Here’s how it works. First, they buy appreciating assets — stocks, real estate and artwork — that grow in value over time. Then, instead of selling these assets and triggering capital gains taxes, they borrow against them. The borrowed money funds their lifestyles, investments or new ventures, all without being taxed as income.

Finally, when they die, their heirs inherit the assets with a “stepped-up cost basis,” meaning any past appreciation is effectively erased for tax purposes. The heirs can even sell the assets without paying taxes on decades of gains. It’s completely legal and perfectly structured within current U.S. tax law.

Why Credit Works Differently for the Wealthy

This system hinges on one thing: having assets valuable enough to borrow against. High-net-worth individuals can secure low-interest loans using their investments or properties as collateral, a luxury that’s often out of reach for the average person.

Moreover, they view debt not as a burden but as a tool for liquidity. Borrowing allows them to keep their assets invested and compounding rather than cashing out to cover expenses. It’s a strategy that quietly compounds wealth over decades.

That said, this playbook isn’t without risk. Market downturns can reduce asset values and lead to margin calls or liquidity issues. But the wealthy are usually insulated by diversification, cash reserves and professional advisors who ensure that borrowing remains sustainable.

Lesson for Everyone

You don’t need millions to apply these principles. Even modest investors can think like the wealthy by using credit strategically, borrowing to invest in appreciating assets, consolidating debt to improve cash flow and prioritizing long-term returns over instant gratification.

The key is discipline. Credit should create value, not drain it. Whether through real estate, a business, or an investment account, debt that earns more than it costs can be the bridge between financial survival and financial freedom.

Final Thoughts

For the wealthy, debt isn’t the enemy — it’s leverage. By mastering credit, they multiply returns, lower taxes and preserve wealth for generations. The rest of us may not be billionaires, but understanding how the rich use credit could be the first step toward building wealth like one.