The ultra-wealthy have mastered a financial strategy that keeps their billions growing while paying minimal taxes. Take Elon Musk – worth hundreds of billions yet paying zero income tax. This isn’t illegal or even questionable — it’s simply understanding how our tax system actually works.
I’ve spent decades studying how the wealthy build and preserve their fortunes, and I’ve discovered that most Americans are playing an entirely different game than the rich. While you’re trying to earn more income (which gets heavily taxed), the wealthy are focused on building assets and using them strategically.
The Buy, Borrow, Die Strategy
The wealthy use a simple three-step approach that’s perfectly legal:
- Buy assets that appreciate – Instead of focusing on salary income, acquire assets that grow in value over time
- Borrow against those assets – Use the assets as collateral for low-interest loans
- Live off the loans – Since loans aren’t considered income, no taxes are due
This strategy works because our tax system only triggers when you sell an asset (capital gains) or earn income. By borrowing against assets instead of selling them, the wealthy access their money without creating a taxable event.
How Elon Does It
Musk exemplifies this approach perfectly. He doesn’t take a traditional salary – his compensation comes as Tesla stock. Since stock isn’t taxable until sold, he can watch his wealth grow without paying taxes on the appreciation.
When he needs cash, he doesn’t sell shares. Instead, he walks into a bank and borrows against his billions in Tesla stock. The bank happily lends him millions at perhaps 3% interest or less. Meanwhile, if he sold the stock, he’d pay around 20% in capital gains tax.
The math is simple: Pay 3% interest or 20% tax. That’s a 17% difference on millions of dollars.
When the loan comes due, he doesn’t sell assets to repay it. He simply takes out a new loan against his now more valuable stock. This cycle can continue indefinitely – what I call “buy, borrow, die.”
The System Rewards Knowledge
Most Americans are stuck paying 20-30% in taxes before they even see their paycheck. They save what’s left, perhaps in a 401(k) that will be taxed again later—meanwhile, the wealthy engineer their finances to minimize taxation at every turn.
The system isn’t broken – it’s designed this way. And it rewards those who understand how to navigate it. The wealthy don’t just earn – they engineer their finances with intention.
What separates the wealthy from everyone else?
- They use loans as wealth-building tools, not burdens
- They focus on cash flow, not just accumulation
- They understand that what you keep matters more than what you make
The good news? These principles aren’t exclusive to billionaires. You can apply the same thinking to your financial life, scaled appropriately.
Applying Wealthy Thinking to Your Finances
Start by shifting your focus from earning more income to building assets that grow. Real estate, businesses, and yes, stocks can all appreciate over time. As these assets grow, you can strategically borrow against them to acquire more cash-flowing assets.
This creates a virtuous cycle: assets grow, providing collateral for loans, which buy more assets, which provide more growth and collateral. All while minimizing your tax burden.
I’m not suggesting you avoid paying your legal tax obligations. Instead, I’m advocating that you stop overpaying the IRS due to a lack of understanding of how the system works. The tax code rewards certain behaviors – primarily investment and business ownership – and punishes others, such as those who rely solely on earned income.
The wealthy don’t have secret strategies unavailable to you. They simply understand the rules of the game and play accordingly. It’s time you did the same.
