Compounding is the ONLY factor in wealth accumulation. It doesn’t matter how much one has; as long as you keep your assets in compounding mode at all times, you and your family should be wealthy over time. Of course, one has to make sure that your assets are quality assets, income producing in particular, and appreciate over time. Should you sell these assets, you want to rotate the proceeds to other quality assets, so as not to DISRUPT the compounding effect. Many people disrupt it by selling partially their assets to lock in some profits, and used to proceeds to fund their lifestyles, such as rewarding themselves with a brand new car, house renovation, or luxury holidays etc. Rewarding yourself is well-deserving, however, this is definitely a better way of rewarding than selling your assets to fund it. This is where Buy, Borrow, Die concept comes in.

Buy is pretty straightforward; over your lifetime, you want to use your disposable income and savings to buy assets. There are many assets which are income producing and appreciating in nature. Stocks & Properties would definitely be top choices for the masses. The key factor in this Buying process is, you want to make sure your assets are quality assets. Put it simply, the income that they generate are of quality in nature, and sustainable. Of course, you want to buy it at a good price. Next is to hold it on for as long as possible. One does not sell their assets unless the quality deteriorates, or there’s better opportunities elsewhere. That’s all you need to know.

Borrow is not straightforward though, but it’s the main tool that most wealthy families use. That’s why the rich become richer, poor become poorer. The poor thinks that borrowing is bad, perhaps they or their parents or friends (who are equally poor) had bad experience with borrowing. Hence they shun borrowing, and every time there’s any outstanding balances, a poor mindset is to quickly settle the bills. The rich think differently from the poor. Borrowing is leveraging. It’s that simple. Don’t focus on borrowing, focus on leveraging, though it has almost same meaning, but invoke a different feeling. What the rich does is this; they leverage/borrow against their quality assets, and get extra funds, to fund their lifestyle or buy more quality assets. The very simple process is this; let’s assume you own $10,000 worth of quality stocks in a brokerage firm, the firm itself will give you a line of equity credit. If you use it, you agree to pledge your assets as collateral with the brokerage firm. In other words, once one has assets, quality of course, the lenders will open line of credits for you. Who are those lenders? Banks, Brokerage firm, Insurance companies if you own life insurance. You see, these parties have tons of money which other people have parked their monies with. They gave these commoners an interest too for parking the money. The firm has to make money from the money. They will eager lend it out to whoever is CREDITWORTHINESS. Creditworthiness would mean the person has assets which the lender can take in as collateral. Income also contribute to creditworthiness as well, and that’s why working adults apply credit card using their income statement. Regardless, the rich often use the line of credit extensively to make them richer, and set PROPER PRINCIPLES with regard to the usage and limit of the credit. The poor abuse the line of credit, they borrow money to fund unnecessary spending, and hence result in deep shit. The rich are comfortable using the tools, as they know what they are doing. The poor are clueless about the tools given. This tool of line of credit is opened to anyone who has assets, whether you are rich or poor. However, the user has to be smart and prudent in using the tools given.

Die would be transferring the deceased assets and liabilities to their beneficiaries. When the poor people die, such transfer takes place too, unfortunately in many cases its too little assets and too much liabilities transferred. The beneficiaries gained nothing much, least the values and life lessons from the deceased. For the rich, it’s the same process too, but in different proportions; more assets, and less liabilities. We call this Wealth transfer. Now, if the beneficiaries are able to stick to the cycle of Buy Quality, Borrow Prudently, & Die Eventually, generations after generations, with COMPOUNDING EFFECT UNINTERRUPTED at all, they will only become richer and richer. Just try compound $100,000 by 8% over 100 years, and you will know what I mean.

While such concepts might seem new and intriguing to many of you, the tools given and methods used has existed for a long time. It’s new because you have yet to use it, correctly.