The wealthy use leverage by borrowing against their existing assets—such as investments, real estate, or insurance cash values—to access capital without selling those assets. This strategy allows them to pay expenses, fund new investments, and grow their wealth while minimizing tax liabilities.

They borrows at favorable interest rates on appreciating, income-generating assets and reinvest the proceeds, which often generates returns exceeding the cost of borrowing.

This approach, sometimes called “buy, borrow, die,” helps preserve their portfolio, maximize gains, and defer or reduce taxes over time, contributing substantially to their net worth growth.

Key Ways Wealthy Use Leverage

• Borrowing Against Wealth to Avoid Selling Assets: Wealthy individuals borrow against their portfolios, such as stocks or real estate, to cover expenses or taxes, rather than liquidating investments. This enables their assets to continue appreciating fully while they manage tax obligations by using loan proceeds instead of selling assets at a gain.
• Reinvesting Loan Proceeds: The funds borrowed are often used to invest in more income-generating or appreciating assets, amplifying their wealth growth by controlling larger asset bases than their cash alone would allow.
• Using Leverage in Real Estate: By putting down a fraction of a property’s value as a down payment and financing the rest, wealthy investors control significantly more valuable real estate portfolios, generating rental income that can cover debt service while benefiting from property appreciation.
• Leveraging Insurance Cash Value: Borrowing against the cash value of whole life insurance policies lets wealth continue to grow inside the policy while providing liquid funds for other investments or expenses.
• Tax Strategy – “Buy, Borrow, Die”: Used by wealthy families, this strategy involves buying appreciating assets, borrowing against them tax-free to fund spending without triggering capital gains, and passing assets on to heirs with a stepped-up basis to minimize taxes on inheritance.
• Risk Management and Cash Flow Focus: Wealthy individuals monitor loan-to-value ratios, maintain liquidity for loan payments, and ensure debt is leveraged against assets with reliable income streams to manage risk and preserve capital.

Using leverage this way turns their assets into fuel for further wealth creation, taking advantage of the time value of money and inflation to increase net worth over time.

This sophisticated use of borrowing and asset management distinguishes wealthy investors’ financial strategies from those who rely mainly on saving and paying down debt. It allows them to multiply returns, sustain growth, and maintain liquidity while minimizing tax impacts.

Sources: BNY Wealth, LendFriend Mortgage, Insurance and Estates, Investopedia, Robert Kiyosaki insights, Financial Mentor, U.S. Bank