“The Illusion of Wealth: How Debt-Fueled Living Keeps You Broke”

Hi everyone,

I am reading Rich Dad’s Cashflow Quadrant. I learnt a lesson and I wanted to share it with you. I hope you like it.

📌 Disclaimer Paragraph:

This content is for educational purposes only and should not be interpreted as financial or investment advice. Always do your own research or consult with a licensed professional before making any financial decisions.

The lesson starts:

The characteristics of Level 1 investor:

Some people try to fix their financial issues by borrowing more and more. They even invest using borrowed funds, calling it “planning,” when it’s really just juggling bills—robbing Peter to pay Paul. They live with their heads buried in the sand, hoping things magically improve.

Though they may own a few valuable things, nearly everything they have is tied up in debt. Credit cards are used without a second thought, and when the balances get too high, they roll them into home equity loans—only to max the cards out again. As property values rise, they borrow more, upgrading their homes under the belief that real estate only goes up in value.

Phrases like "no money down" or "easy monthly payments" are music to their ears. They purchase luxury items—boats, pools, vacations, or flashy cars—and label them as “assets,” only to be shocked when banks won’t lend them more money. Shopping becomes their sport, and they justify every purchase with lines like: “I deserve it,” “It’s on sale,” or “I want the kids to have what I never did.”

They believe stretching debt over decades is clever, thinking they’ll “work it off later.” But they often spend more than they earn—and then some. These are consumers through and through. If they have cash, they spend it. If they don’t, they borrow it.

Ask them what’s wrong, and they’ll usually say they don’t earn enough. But no matter how much their income increases, the debt gets deeper. What once felt like dream money now isn’t enough. The real issue isn’t their income—it’s their habits. Overspending, emotional buying, and denial create a cycle that feels impossible to escape.

Many end up emotionally drained, believing there’s no way out, yet they keep spending—especially when they’re feeling low. Like emotional eaters bingeing on food, they binge on shopping. Then feel worse… and spend more.

Fights about money become common at home. Justifying purchases becomes a routine. And while they might look wealthy, their lifestyle is built on shaky ground—flashy cars, big homes, but all funded through loans. One accident or economic downturn, and the entire house of cards collapses.

One former jewelry store owner in a financial class believed his past success in business would carry over into investing. But when the economy dipped, his stores folded. The debt didn’t. Within six months, he was bankrupt—still unwilling to admit he needed a different mindset to succeed as an investor. The skills that work in business don’t always apply in investing.

Unless people like this make a serious shift, their financial outlook is grim—unless, of course, they marry someone rich who’s willing to fund the lifestyle.

Comment to let me know which people you know are like this? Also tell what you thought about it. Tell if you are in this category.

By the way, if you want to learn about them in details then you can get them in the link below:

More to read:

Millionaire Firefighters:

Real risk lies in being uninformed in anything:

The reasons for learning a lot of things- (Eye opener)

Old way of measuring wealth:

If you have liked reading so far then join the newsletter. Over here, I share stuffs like these as well as financial education. I believe that you will enjoy reading these. If you want to read them then join the newsletter with the link below: