Recently, I was in charge of the mortgage business and contacted many customers. Before 16, the down payment was 10, and the bank loan was 200,000,300,000. Easily bought a house, monthly payment 1000 yuan to 2000 yuan.

In a blink of an eye, two or three years passed. As long as you buy it in the main city and suburbs, the appreciation will be at least one million, and the appreciation in good areas will be more than one million, just two or three times, and the annual income will double.

In the past, I was influenced not to take on a mortgage to tie my flying wings. I think even if you have money, you should not let yourself be burdened with hundreds of thousands of debts when you are young and become a house slave.

But in fact, the person who really borrows money to buy a house will work harder to get better and earn more income, and he will use the leverage efficiency of the bank to gain at least three times the wealth appreciation through a small amount of funds in just a few years.

A stable job is our most basic living guarantee, but at the same time, we should learn to invest and manage money slowly and accumulate the value of assets through appropriate leverage.

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So what is leverage?

Archimedes famously said: Give me a fulcrum, and I can pry up the whole earth.

There are many concepts of leverage, but what is financial leverage?

Simply put, financial leverage is a multiplication symbol (*). With this tool, the result of investment can be amplified, and whether the final result is profit or loss, it will increase in a fixed proportion.

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What are the benefits of financial leverage?

The function of lever is to amplify power, so that people can pry up objects much heavier than their own strength. Financial leverage is to amplify the role of money, so that people can get dozens or even hundreds of times of money with less money. Actually, it is borrowing.

The most commonly used financial lever in our daily life is buying a house.

For example, we have 6,543,800 yuan in cash, borrowed 2 million yuan from the bank and bought a 3 million house. In fact, we borrowed three times the leverage. If the house of 3 million rises to 3.4 million a year later, then we will sell the house, repay the bank loan and earn 400,000 yuan regardless of taxes and fees, which is equivalent to using the initial/kloc-0.00 million cash and earning 400,000 yuan a year.

However, if we buy a small house with10,000,000 cash without leverage, and the house rises to1/kloc-0,500,000 in one year, then our annualized rate of return is 15%, so financial leverage can be a multiple of our expanded income when investing.

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The benefits are in direct proportion to the risks. Using financial leverage to invest may bring us several times of huge profits, but at the same time it also faces the same multiple of investment risks.

The most famous financial leveraged investment effect event in history is the subprime mortgage crisis in 2008.

The subprime mortgage crisis in the United States can basically be said to be the result of leveraged trading by financial institutions. Using loan products to operate real estate investment is actually simply to rent other people's funds to make money for yourself. However, this extremely tests the pre-judgment of the market and investors. If the house doesn't go up, it will also lose many times.

How to make good use of financial leverage in life?

It is the stimulus to reasonably control our current cash and liabilities. Generally speaking, the monthly repayment amount of our loan should not exceed 70% of our monthly income.

Rational use of financial leverage is one of the effective ways for us to manage wealth and improve the utilization rate of funds, but abusing financial leverage regardless of risks will bury great hidden dangers.