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A New York Times bestseller and one of the Ten BestBusiness Books of 2013 by WealthManagement.com, this bookbrings a new vision of the value of debt in the management ofindividual and family wealth
In this groundbreaking book, author Tom Anderson argues that,despite the reflex aversion most people have to debt—anaversion that is vociferously preached by most personal financeauthors—wealthy individuals and families, as well as theirfinancial advisors, have everything to gain and nothing to lose bylearning to think holistically about debt.
Anderson explains why, if strategically deployed, debt can be ofenormous long-term benefit in the management of individual andfamily wealth. More importantly, he schools you in time-testedstrategies for using debt to steadily build wealth, to generatetax-efficient retirement income, to provide a reliable source offunds in times of crisis and financial setback, and more.
- Takes a "strategic debt" approach to personal wealthmanagement, emphasizing the need to appreciate the value of"indebted strengths" and for acquiring the tools needed to takeadvantage of those strengths
- Addresses how to determine your optimal debt ratio, or yourdebt "sweet spot"
- A companion website contains a proprietary tool for calculatingyour own optimal debt ratio, which enables you to develop apersonal wealth balance sheet
Offering a bold new vision of debt as a strategic asset in themanagement of individual and family wealth, The Value ofDebt is an important resource for financial advisors, wealthyfamilies, family offices, and professional investors.
|Product dimensions:||6.20(w) x 9.10(h) x 0.90(d)|
About the Author
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.
Table of Contents
Part 1: The Value of Debt in the Management of Wealth1
Chapter 1: Strategic Debt Philosophy: An Overview 3
How This Book Can Add Value to Your Life 3
The Five Tenets (or Action Principles) of Strategic DebtPhilosophy 4
Chapter 1: Summary and Checklist 14
Chapter 2: The Basic Idea: Limiting the Costs, the Impacts,and the Duration of Financial Distress 21
Risk of Financial Distress 22
The Direct and Indirect Costs of Financial Distress 23
The Impact of Financial Distress: Five Levels 24
The Duration of Financial Distress 25
The Four Indebted Strengths: A First Look 26
The One Thing You Must Consider! 26
Chapter 2: Summary and Checklist 29
Chapter 3: Strategic Debt Practices: An Overview 33
Understanding and Taking Advantage of Strategic Debt Philosophy34
Achieving and Maintaining an Optimal Debt-to-Asset Ratio 37
Calculating Your Debt-to-Asset Ratio 41
Should Your Primary Residence Be Included in Your Debt Ratio? 43
When to Pay Down Your Debt, and When Not To 45
Advanced Practices and Scenarios 47
Chapter 3: Summary and Checklist 49
Part 2: The Assets-Based Loan Facility 53
Chapter 4: The Value of an Assets-Based Loan Facility (ABLF)55
What an ABLF Is and How It Works 56
The Many Advantages of Having an ABLF in Place 59
Why Virtually Every Company Has a Line of Credit 61
Surviving Storms and Other Natural Disasters 62
The Criticality of Being Proactive and Assessing Risks 64
Family Finances: First Bank of Mom and Dad; Elder Care BridgeLoan 67
Taking Advantage of Opportunities and Distressed Sales 68
Average ABLF Usage and the Win-Win-Win Scenario 70
Chapter 4: Summary and Checklist 71
Part 3: Scenarios for Success 75
Chapter 5: Long-Term Wealth Amplification through Capturingthe Spread 77
The Basic Concept: Inherent Risks with Great Potential Rewards77
Three Key Factors to Consider 79
Some Scenarios for Capturing the Spread 83
Synching with Your Investment Strategy 93
Chapter 5: Summary and Checklist 93
Chapter 6: Holistic Financing of the Expensive Things YouNeed and Want 99
A Better Way to Buy: In the Company of Holistic FinancialThinkers 99
Four Principles When Financing the Purchase of a Desired Item100
A Better Way to Purchase a Vehicle (or Almost Anything Else)108
Purchasing a Second Home: Pluses and Minuses 111
100 Percent Financing: The No Down Payment Real Estate PurchaseOption 117
Chapter 6: Summary and Checklist 119
Chapter 7: Generating Tax-Efficient Income in Retirement orDivorce 123
Introduction: Three Goals (and Some Disclaimers) 123
An Opening Scenario for No Taxes in Retirement 124
Borrowing Versus Selling to Access Your Money 125
A Better Alternative to a Familiar Story 127
Tying It Back to Capturing the Spread 128
Revisiting Tax Issues 130
Making Use of Strategic Debt Strategies and Practices in Divorce138
Chapter 7: Summary and Checklist 143
Chapter 8: Conclusion: What This Book Is Really About149
What We Hope You Have Taken Away 150
Strategic Debt as a Financial Engine over the Decades 153
Paradoxes of Plenty: Some Surprises in Maintaining an Ideal DebtRatio 158
Investing in the Future: A Cautionary Reminder 162
A Final Thought 164
Chapter 8 Summary: A Recap of the Book’s SignificantLessons 164
Part 4: Appendixes 169
Appendix A: The Varieties of Debt 171
Appendix B: Strategic Debt Practice for the Young and Those withLimited Assets 175
Appendix C: No Guarantees: Limiting the Risks of Investing in aCrazy World 185
Appendix D: Some Examples of Ideal Debt Ratios 209
About the Author 231
About the Companion Website 233
Most Helpful Customer Reviews
This book provides a unique perspective for leveraging debt to help maximize wealth. Many very intelligent business and community leaders make decisions in their personal finances that shy away from debt and fail to take advantage of the tools available. The author carefully describes the principles you need to utilize what he defines as "Indebted Strengths" and explains in very simple, easy to understand terms how to apply the innovative concepts to maximize your personal wealth, minimize your tax burden and have credit available immediately for those scenarios you can't predict. While these concepts are new to personal finance, they are grounded by the backbone of how all businesses structure their balance sheets and for almost every controversial statement - he backs it up with an amazing amount of detail crediting the sources in footnotes. What I liked the most reading this book was the number of "ah ha" moments I had learning new things about debt, borrowing against my assets at seemingly ridiculous low rates and how all these tools would allow me to pay significantly less taxes. The book also provides clever ways to analyze common family questions like should I buy a rent or buy a vacation home and if I do buy - how I can do that in a way that lowers my monthly cost significantly. The Value of Debt is a must read for anyone who has a mission of growing their personal net worth. The author has a brilliant gift for writing and is able to explain complex topics in such a way that people of all levels will find it a beneficial read. But arguably the most important part of this book is the concepts have the potential to revolutionize personal finance and everyone from financial advisors to individual investors should give these ideas serious consideration.
This book is an easy read, with simple, clear examples that provide the tools for expanding one’s thinking about methods of personal investments and exploring alternatives for making large scale purchases. Although debt is a four letter word, this book shows it is not evil or undesirable. It convincingly forces you to look at debt as a good thing, demonstrating how one can leverage debt for personal gain and improved financial security. Well worth the time it takes ti read it.
Tom Anderson expertly navigates the art and science of personal balance sheet management in this new investment classic. Tom takes a measured and well reasoned approach to managing debt, setting aside extreme views at either end of the debt debate and leaving the reader armed with actionable ideas to help maximize their wealth. The Value of Debt should be in every advisor's personal library, with copies at the ready to give to their affluent and high net worth clients.
The other side… Of all the personal finance books I have read, this is the first to focus solely on the liability side of the balance sheet. Most personal finance books simply lump all debt together and cover it in a few paragraphs or a short chapter, with the general consensus always being to pay off personal debt ASAP. This book, however, provides specific examples of how and when to use debt to make individuals even wealthier. More importantly, the book shows how structuring debt properly can actually lessen the risk of financial distress. As the author discusses, corporations use debt to protect against potential disasters every day… Why don’t individuals? I will be establishing a personal ABLF tomorrow! Unlike the general unanimity in our society today, having SOME personal strategic debt can be a great tool and help to strengthen the balance sheet. A must read for any individual focusing on a holistic approach to managing their balance sheet.
REQUIRED READING!!! Everyone member of my family will be required to read this book. It challenges every belief system that has been passed from one generation to the next regarding personal debt. If you don't read this book, then you do not care about creating generational wealth for your family.
Excellent read that takes an academic view on a topic that typically is only looked at through a very narrow lens. I particularly enjoyed the discussion around taxes in divorce and the benefit ordinary income can potentially have in retirement. I always though long-term capital gains were what everyone wanted in retirement until I read this book.
This book provides valuable ideas for higher net worth individuals and professional financial advisors. The book inludes a formula to calculate a personal debt ratio and gives the reader the range of an "ideal debt ratio". Anderson also very clearly states why nearly everyone should have an Asset Based Loan Facility in place (a line of credit) for emergencies. The book tells us that debt is not an abhorent concept (in fact, it is a very useful tool), when used in an appropriate ratio and at favorable terms for the investor.
This was a very interesting book that challenged what I had previously thought about debt during retirement. It is well written and a fairly quick read.
This is a fantastic and informative read. The author constructs a conceptual framework around individuals' debt where most of us simply base our decisions on a knee-jerk aversion. He does this simply by reapplying common business practices to an individual's balance sheet. Thinking holistically about debt, striving to maintain an optimal debt ratio, capturing the spread; you'll quickly see that these practices should have been engrained into us even before achieving financial independence; you'll wish you would have known these concepts sooner, to have applied them for your benefit in many of your past financial decisions.
As a former CPA and financial advisor I was very excited to read this book. I really believe in Tom's holistic approach that a financial advisor must look at client's assets and liabilities to increase their net worth. I often worked with retirees who had their home paid off but few liquid assets and little cash flow. Had they used the strategies in this book they probably would have been better off. Although this book was technical, I found it very easy to read and follow. I am excited to share this book with some of my debt adverse friends and family!
As a retired person, I always thought it was a badge of honor to have zero debt. Mr. Anderson's insights showed me that I just might be leaving quite a bit on the table thinking this way. I guess it's time to take another look at things.
This book was a fantastic read. It was written in terms the average reader could understand, but complex enough for those who want details to go with the concept. It takes a controversial idea (leveraging debt)and shows how it can be used to increase flexibility and liquidity, much the same as a corporation uses debt to free up capital. I know I’m not the "target audience" with my net worth, but I still found it a very useful book. I am in the process of evaluating our family debt ratio and what our goals for the future should be and this book made me fundamentally change how I look at our balance sheet!
Value of Debt was a nuanced approach to a subject I had never heard spoken about before in terms of personal finance. Will definitely be a part of my future financial planning sessions.
Wow! What a great read and easy to understand. I thought I was pretty smart when it came to finance but the author takes a subject that we are all familiar with (DEBT) and shows how to use it to your advantage in a way you may have not thought of. Whether you have a financial advisor or not, you will benefit from reading this book. This book gives practical advice on how to use debt to your greatest advantage, similar to the way a company would. This book makes it clear that there are tools and resources available to that you may not be aware of. This book sheds light on those resources and opens the door for people to engage their financial advisor and ask the questions they may not be asking -but they should be asking. Worth reading.
This is a book everyone interested in successfully managing their finances should read. The Value of Debt breaks uncharted territory, exploring how to use your personal balance sheet to enhance your net worth. As a finance professional myself, this provides a well-researched guide to navigating the formerly opaque world of personal debt. Thomas Anderson has shed light on how personal debt can be used to create value. Using concrete, step by step examples, this book shows why debt is not a four letter word to be avoided, but is a key piece of the portfolio management landscape. The industry of money management has just taken a large step forward, and we are all better off because of it.
Virtually every popular author on personal financial matters declares right out of the box that all debt is bad (or outright evil), and everyone should get rid of any debt they have as soon as possible and do everything to avoid debt under all circumstances. But this simplistic one-size-fits-all approach is not something that Tom Anderson is willing to go along with. Think of it this way: if a parent, relative, or good friend truly helps you out, and you are indebted to them, is that a bad thing? No; it's a good thing, that is, when you say, "I am indebted to you" it is an admission of help received and appreciated, a sign of respect. Similarly, if you have some resources to start with, turning to your own "indebted strengths" (as Anderson calls it) enables you to help yourself (and your family) out both now and in the future by providing increased liquidity, increased flexibility, increased leverage, and increased survivability. While it's true that you never want to take on too much debt, it's also true that there is a very good reason why nearly every company has debt, including those that can easily afford not to. This book showcases an original idea--that debt can be incredibly valuable in many stages and arenas of life--and illustrates things that nearly everyone with assets *should* do, and other things that are certainly well-worth contemplating. A ground-breaking book, well worth the read, if nothing else to stimulate thought, conversation, and a bigger personal financial picture. I highly recommend it.
I have come to read many personal finance, investing and business books but I can honestly say none of them have clued me in to the role debt plays in making money and balancing my personal wealth. The author takes a unique view on a subject that for some is taboo, and he makes a cohesive argument on why some debt should be embraced, and how it can be used to increase your portfolio. It is a quick read with lots of examples -- so no one should feel lost in any jargon, theories or ideology. It brings home its point in an easy-flowing style. Your first investment to riches is to buy this book.
I recently read this book and found it to well written and thought out. Too often, consumers are conditioned to believe that debt is bad and must be avoided at all costs. Would a CFO manage his/her assets with that same mentality? No! So why should a head of household? In this book, Mr. Anderson presents a sound argument for incorporating a debt strategy into a person's financial plan for certain situations to achieve their objectives. Bravo! Well done.