3 Wealth-Building Strategies the Rich Use That Would Sink the Poor in Debt
Written by
Cindy Lamothe
Edited by
Amen Oyiboke
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Everyone wants to follow the rich — take their strategies and use them in their own life. The problem? A lot of the ways they build wealth could completely sink a low-income person into debt.
“I’ve observed critical differences in how wealthy individuals leverage financial tools compared to those with limited resources,” said Kevin Shahnazari, founder and CEO of FinlyWealth.
“Wealthy individuals use sophisticated leverage strategies that would be catastrophically risky for those without substantial financial cushions.”
Here are some wealth-building strategies the rich use that would sink the poor into debt.
Strategic Debt Utilization
One prime example, according to Shahnazari, is strategic debt utilization, where high-net-worth individuals access low-interest lines of credit to invest in appreciating assets like real estate or market-linked investments.
“While a wealthy investor might secure a 3% loan to purchase a property expected to generate 8% [to] 10% returns, the same strategy could devastate someone living paycheck to paycheck who lacks the financial resilience to weather potential market fluctuations,” he said.
Credit Card Rewards Optimization
Credit card rewards optimization is another strategy that dramatically differs by economic status.
“Affluent individuals meticulously manage multiple credit cards, strategically cycling through signup bonuses and maximizing points on high-reward cards,” said Shahnazari. “They pay balances in full, effectively converting everyday expenses into travel rewards or cash back.”
For lower-income individuals, he said the same approach could quickly spiral into compounding interest and crushing debt, as they might lack the consistent cash flow to avoid interest charges.
Tax-Advantaged Borrowing
Another critical strategy, said Shahnazari, is tax-advantaged borrowing, such as using margin loans against investment portfolios or leveraging home equity lines of credit for investment purposes.
“Wealthy investors can borrow against assets at favorable rates, effectively using their existing wealth to generate more wealth,” he said.
Shahnazari believes this approach requires a robust investment portfolio and consistent income — resources typically unavailable to those struggling financially.
“Financial leverage is a sharp knife — incredibly powerful when used with precision, but potentially destructive when wielded without expertise.”
Andrew Gosselin, CPA and senior contributor at Coupon Mister, agreed. “Taxes may seem like a dull topic, but for the wealthy, tax planning is a secret weapon.”
He explained they often know how to take advantage of deductions, credits, trusts, and charitable contributions that let them keep more of their returns.
“This is legal and above board, but it requires a level of knowledge and sometimes professional guidance that not everyone can afford. Someone who earns less might not have these options, so they end up paying a larger chunk of their income in taxes, relatively speaking, making it tougher to build wealth over time,” said Gosselin.
Affluent People Handle Money Differently
“The main point is that wealthy individuals don’t just have more money — they handle it differently,” said Gosselin.
“They borrow money to invest in assets that usually appreciate, they spread their money around in ways that reduce risk, they take full advantage of credit and rewards without falling into debt traps, and they play the tax game to keep more of what they earn.”
He said these strategies can work brilliantly for those with the resources and know-how, but they can be a slippery slope for anyone who tries them without a safety net.
“That’s what I’ve seen in my experience: a set of financial tools that look attractive, but if someone with tighter finances attempts them without careful planning, they might end up buried in debt rather than building wealth.”
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