'Why the rich love debt, while the middle class fears it': Bestselling author Anil Lamba on smarter debt use

For most people, money is a mystery. We go through school, college, and even our working years without ever learning how money actually works. We earn, spend, save a little, and hope for the best. In a compelling conversation on Sharan Hedge’s 1% Club show, noted chartered accountant, financial literacy advocate and bestselling author Dr Anil Lamba dismantled some of the biggest myths around money, debt, inflation and business management — revealing why the richest 1% use debt as a strategic tool while the rest of the population fears it.

Lamba, whose books Romancing the Balance Sheet and the newly released Start Early, Finish Rich, are widely regarded as essential reading for entrepreneurs, argues that most Indians suffer financially because they were simply never taught how money works. “Schools don’t teach it, colleges don’t teach it, and workplaces don’t teach it. We earn, spend, save a little and hope for the best,” he said.

One of the biggest misconceptions he highlighted is the obsession with high fixed-deposit returns. “People still remember the days of 15% FD interest, but interest rates mean nothing in isolation,” Lamba noted, explaining that real interest — returns adjusted for inflation — is what ultimately determines purchasing power. He recalled periods in countries like Mexico where banks offered 80% interest, but inflation ran at 100%. “If inflation is higher than what you earn, you are becoming poorer,” he warned.

Lamba also cautioned that India’s current environment of 5% post-tax FD returns against nearly 10% inflation has pushed savers into negative real returns, a situation that cannot continue for long without damaging the banking ecosystem.

A recurring theme through the conversation was the misunderstanding of debt. “People treat leverage like a bad word,” Lamba said. “Many proudly say‘I am debt-free’ — but either that means you’ve stopped growing or that you’re funding growth using expensive equity.” He emphasised that equity is often three times more costly than debt, and that businesses must learn to use debt strategically by following two rules:

Deploy borrowed money in projects that generate returns higher than the cost of debt.

Ensure the money comes back before the debt repayment becomes due.

“When these rules aren’t violated, debt becomes a catalyst for growth,” he said, adding that a founder starting a ₹100-crore venture should ideally “start a ₹300-crore business — put your ₹100 crore and borrow the remaining ₹200 crore.”

Lamba strongly dismissed the popular narrative that business exists for all stakeholders. “That’s nonsense. Business is run for one stakeholder — the owner,” he said. “If vendors, employees and bankers are all making money but the owner is earning 5–7%, the business is not sustainable.”
Discussing why many companies fail, Lamba said nine out of ten fail because of financial mismanagement, not because of poor products. And the root problem, he argued, is that entrepreneurs do not know their cost of capital. “Bring me 100 businessmen — 98 cannot tell you their true cost of capital. Within that, the most expensive capital is the owner’s capital, which founders wrongly assume is free.”

Lamba also urged individuals to understand inflation, compounding, taxation and investment vehicles such as PPF, calling financial literacy the only real protection against lifetime savings evaporating in retirement. “There are tragic cases where people save their whole lives and realise the money won’t last six months,” he said.

His message was clear, urgent and universal: learn money, use debt wisely, and treat knowledge—not savings—as your ultimate financial safety net.