I can still see that pea green shag carpet I was lying on in our little one-story Dunwoody house, circa 1976. I was playing with my Steve Austin action figure — you remember, the Six Million Dollar Man! Anyway, our Zenith TV was on the fritz and my sister was whining about it. My mother, raising the two of us alone, said sternly, "Laurie, I already told you, we will all go together and pick out a new TV AFTER my next closing." My mom was a hard-charging, seven-days-a-week residential real estate agent at Harry Norman, trying to keep our little crew afloat, and there was no chance she'd buy anything she couldn't pay for with cash.
It's a mindset that's likely familiar to many of you reading this — a mindset borne out of the era of her parents, the Great Depression. While there's certainly some merit to the "only use the money you have in your hands" mentality, it's also an antiquated one. It is an approach as outdated as the linoleum in our shotgun kitchen, a kitchen that featured a phone on the wall with a cord attached to it. Today, many wealthy Americans have flipped the script on how they buy things and fund their lives, and the masses are catching on.
There is a fundamental difference between how regular consumers buy things and how true wealth sustains itself. If you look at it purely through a math lens, one could argue the unknowing — or put less gently, the amateur — sells assets to create cash. The pro uses assets to unlock debt.
When you read headlines about billionaires purchasing mega-yachts, sprawling estates, or acquiring entire media companies, one might think they're selling billions in stock or other assets to make it all go. Not a chance.
Selling appreciated assets triggers a significant realization event for capital gains taxes, wiping out up to 20% to 37% of that wealth instantly, depending on federal and state jurisdictions.¹ Furthermore, the moment you sell an asset, you permanently halt its ability to compound. You remove that money from the playing field entirely. This is something we discuss nearly daily with our membership. You want your money working for you while you're doing your day job, while you're vacationing, hanging with your kids, playing tennis or golf, and sleeping. Done right, money never sleeps, and compound interest is the closest thing we have to magic.
The ultra-wealthy utilize a strategy colloquially known as "Buy, Borrow, Die." They buy or build appreciating assets, they borrow against those assets to fund their lifestyle and new ventures, and eventually, those assets pass to their heirs with a stepped-up basis, potentially avoiding the built-in capital gains tax liability.²
The Math Behind the Strategy
The math behind it is remarkably clean. If your equity portfolio compounds at a long-term historical rate of 8% to 10% — which is not guaranteed and past performance is not indicative of future results — and you can secure a line of credit secured by that portfolio at a cost of 5% to 6%, you are potentially capturing a positive net arbitrage in a favorable rate and market environment.³ Your principal remains untouched, your wealth has the opportunity to grow, and your lifestyle may be funded by the spread. You are essentially living on borrowed money while your invested money has the potential to return more than the cost of the debt.
This strategy is well-established, highly repeatable, and no longer reserved exclusively for tech titans. Investors with meaningful, non-retirement brokerage accounts are using these exact same structural mechanisms to fund their personal lives without interrupting their long-term compounding approach. For our Exit Wealth members, we work to secure highly competitive rates for securities-backed lines of credit, often referred to as an SBLOC or Pledged Asset Line.
Imagine you have a robust, well-diversified brokerage account worth $2 million. Under a standard SBLOC agreement, a custodian will typically lend you anywhere from 50% to 70% of the account value, though terms vary by custodian, account composition, and market conditions. This gives you an on-demand line of credit of over $1 million. You don't pay a dime in closing costs or application fees; you only pay simple interest on the exact amount you draw down.
How do people actually deploy this in the real world?
Instead of liquidating $200,000 of equities to put in a backyard pool, buy a boat, or pay for a luxury vehicle in cash, an investor draws from their SBLOC or Pledged Asset Line. When a child's private university tuition bill arrives, they borrow against the portfolio. When they need a down payment for a primary residence or a vacation property, they write a check against their line of credit.
By using an SBLOC, the underlying $2 million portfolio remains 100% intact. It continues to collect dividends, it continues to ride the market's long-term trajectory, and it continues to maximize the compounding effect. If market returns outpace the cost of the debt over time, this approach can allow you to finance your lifestyle while potentially preserving your core net worth — though this outcome is not guaranteed and depends heavily on market conditions and the cost of borrowing at the time.
Of course, leverage is a double-edged sword. This strategy requires strict discipline and professional risk management. Because the line of credit is collateralized by volatile equities, a sharp market downturn can compress your collateral value, potentially triggering a maintenance call if the loan-to-value ratio gets too high. This is why we never advocate maxing out these lines.
The takeaway is simple. The next time you face a major capital expenditure — with a nod to your mother who may shake her head — don't immediately look to liquidate your winners. Look to leverage them, always in consultation with your advisory team. We're here to help.
SOURCES
1. IRS Capital Gains Tax Rates 2026 — irs.gov/taxtopics/tc409
2. IRS Stepped-Up Basis Rules — irs.gov/publications/p550
3. S&P 500 Long-Term Historical Returns — spglobal.com/spdji/en/indices/equity/sp-500
The Exit Wealth® Team
All opinions expressed in this newsletter is for general informational purposes and constitutes the judgment of the author(s) as the date of the newsletter. The opinions and views expressed by the author are personal and based on economic or market conditions at the time of publication. Actual economic or market events may turn out differently than anticipated. Nothing in this material is intended to serve as personalized investment, tax, or insurance advice. These opinions are subject to change without notice and are not intended to provided specific advice or recommendations for any individual.
The material has been gathered from sources believed to be reliable, however Exit Wealth® cannot guarantee the accuracy or completeness of such information, and certain information presented here any have been condensed or summarized from its original source. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always, please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns; please seek advice from a licensed professional.
