Let's do a thought experiment. How much money do you need to live a great life?

For arguments sake and to make the math easier, let's say it's $100,000 per year for the rest of your life. Let's also say you're 50 years old and you think you're going to live another 50 years.

By that logic, if you had $5 million dollars you could live out the rest of your days pretty comfortably and never work again. Of course, in reality it doesn't quite work that way because of monetary debasement. With rising cost of living your $5 million might only last 25 years (Just guessing, someone else can do the math on this one). But that's not really my point. I'm just trying to frame how much money you actually need.

How do the rich actually do it? I can assure you they don't keep millions of dollars in cash sitting around in their bank account. What they actually do is hold assets that store value over time and borrow against them until the day they die.

So let's play out that scenario again, only this time you're the owner of valuable assets. On paper, your assets are worth $5 million. You do not have any cash but the bank is happy to give you a small "cost of living" loan for $100,000. They don't even really question it because it's such a tiny loan compared to the value of your assets. The monthly repayment is $600.

That means, you need to repay just $7,200 per year to service the loan. You can even use the borrowed money to make the repayments. The rest of the money can be spent on living your life. The best part is, you never had to sell anything. No capital gains taxes. Your assets are still your assets.

At some point you run out of cash. You need to refinance your loan so this time you borrow $200,000 to pay back the original debt and have some money for cost of living. Your repayments go up to $14,600 per year. But again, you never had to sell anything. No capital gains taxes. Your assets are still your assets.

Okay, at this point you're probably thinking this feels like a scam. It's an unsustainable never ending debt cycle. And that's true to a degree. But remember your assets are also becoming more valuable (measured in dollars) over time. At any point you can sell some of your assets and pay back the debt in full.

You might be surprised how long you can keep this going. Can you keep it going until the day you die? Maybe. If you manage to do that your assets pass down to your children after paying the debt. Your children receive those assets tax free. No capital gains taxes are ever paid.

Remember, this is just a thought experiment. In reality you're probably not going to live entirely off the borrowed money. You'll probably find a way to have an income from a business or job to make the loan repayments easier.

I just wanted to point out that there are other ways to think about money. You can do some very interesting things if you hold valuable assets.