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IF you wish to build great wealth, there are two mutually exclusive paths you may traverse. One is safer than the other…

All of us are economic consumers, while a little over half of us are simultaneously economic producers. If you’re between 20- and 60-ish, you’re probably an economic producer to some extent.

If so, congratulations might be called for because from a financial planning perspective it is way better — during our primary working decades — to be a mega-producer than a mega-consumer.

To calculate if a person has been economically self-sufficient over a full lifetime, we should tabulate how much money he or she burned through while under parental care, throughout the working years, and over the full duration of retirement. That total lifetime consumption (LC) can be denominated in RM.

Therefore, in simple nominal RM terms, LC will equal the sum of consumption totals as a youth (YC), working adult (WAC) and retiree (RC).

Therefore, LC = YC + WAC + RC.

The net economic producers of the world will generate (produce) a surplus of wealth during their working years in excess of their LC or lifetime consumption. So, if we designate the simple nominal value of their lifetime production as LP, then for net economic producers we find that this formula holds true:



LP > YC + WAC + RC

Translation: Economically productive people earn more over their lives than they spend. In contrast, the economically unproductive spend more than they earn.

Note: What I’ve written is excessively simplistic because it disregards inflation as a relevant discount rate. Still, I hope my omission makes it easier for you to follow my primary explanation.

If so, please bear with me as we layer on the negative effects of the interest on loans we take out, which raise our consumption totals, and the gains we make on our savings and investments, which elevate our production totals.


Without complicating things further with formulas, let me point out when we take on bad debt on depreciating assets like cars, furniture, handbags or watches, we squander the interest we pay and thus reduce the overall quality of life we may enjoy over our full lifespans with the remainder of our wealth.

But if we instead manage our affairs wisely, either by totally eschewing debt or by only taking on good debt on assets that appreciate in value or that generate positive cash flow into our lives, purses, bank accounts and portfolios, we elevate our quality of life, again over the full span of our time on Earth. Our path to success is made possible when we nurture the habit (and principle) of delayed gratification.

The safest way for most of us to succeed financially is to either avoid debt all our lives or to get out of debt as fast as possible. Yet, in all honesty, there is another way to build wealth:

Knowing how to use debt wisely, which boils down to using good debt to purchase appreciating assets like real estate or direct businesses. This is a much riskier path that may lead to astounding levels of wealth but which necessitates embracing the elevated real risk of ending up much poorer over a full lifetime.

Warning: DON'T EVER use debt to buy stocks or unit trusts. While both are great ways to build wealth slowly over decades, their inherent volatility means that buying them with debt exposes you to potentially debilitating price collapses that those who judiciously avoid debt can easily ride out.

Good assets make us richer by generating cash inflows and capital appreciation. Good debts do the same. Yet the vast majority of us use debt badly and thus unwisely.

We pile on bad debts (through pure consumption fuelled by our unbridled appetites and on depreciating assets) for decades on end because we refuse to sacrifice short-term wants for abiding long-term gains. We choose to be consumers first and producers second; and so, we lose.


For most of us, the best and safest option to thrive and to dramatically raise our odds of one day joining the ranks of millionaire retirees is a steady programme of wealth building and debt eradication. To implement such a programme, we must shake off our financial stupor and metaphorically scream to our world: “Enough is enough!”

So, while I acknowledge piling on huge amounts of good debt can potentially make us super rich IF things go our way, I also know that debt, of any sort, is a potentially lethal bed-mate.

Therefore, most of us would be wise to go against the debt-embracing norms of society, culture and advertising, and commit to becoming 100 per cent debt-free ASAP — and then staying that way. If you disagree with me, study Robert Kiyosaki's book Cashflow Quadrant for an excellent treatment of good debt.

On the other hand, if you agree with me, I urge you to ferociously declare war on ALL your debts, good and bad alike. To help you along your way, read two of my recent columns (which you may access here in which I’ve outlined the powerful Small-to-Big (or debt snowball) strategy for escaping debt. Then implement those steps and celebrate as they incrementally lead you to a safer, brighter, finer financial future.

© 2020 Rajen Devadason

Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at; he may be connected with on LinkedIn at, or via [email protected] You may follow him on Twitter @RajenDevadason.

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