The Value of Debt

274 Pages·2013·9.41 MB·English

by  Thomas J. Anderson

The Value of Debt
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The Value
of Debt
How to Manage Both Sides
of Your Balance Sheet
to Maximize Wealth
Thomas J. Anderson
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Cover image: © iStockphoto.com/Feng Yu
Cover design: Paul McCarthy
Copyright © 2013 by Thomas J. Anderson. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Anderson, Thomas J. (Certifi ed investment management analyst)
The value of debt : how to manage both sides of a balance sheet to maximize wealth /
Thomas J. Anderson, CIMA, CRPC.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-75861-8 (hardback); ISBN 978-1-118-75851-9 (ebk);
ISBN 978-1-118-75863-2 (ebk)
1. Finance, Personal. 2. Debt. I. Title.
HG179.A55976 2013
332.024'02—dc23
2013020675
Printed in the United States of America
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For Sarah, John, Rosemary, and Oliver

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Contents
Foreword xi
Acknowledgments xv
Introduction xvii
Part 1: The Value of Debt
in the Management of Wealth 1
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 Debt Philosophy 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
vii
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viii contents
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 Philosophy 34
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 Bridge Loan 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 Amplifi cation through
Capturing the Spread 77
The Basic Concept: Inherent Risks with Great
Potential Rewards 77
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