Bank on Your Neighbor: The Audiobook - Chapter 4

What if debt isn’t the villain we’ve been taught to fear? In Chapter 4 of Bank on Your Neighbor, Mel Dorman unpacks the myth that “all debt is bad.” From heartbreaking lessons in India’s red-light district to the empowering leverage of her first duplex, Mel shows how debt can either chain you—or set you free. You’ll learn the difference between “bad debt” that keeps us trapped and “good debt” that builds lasting wealth, plus practical tips on paying off credit cards, negotiating with lenders, and using leverage to accelerate financial freedom.

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Transcript

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Hi, friend. I'm Mel Doman, real estate investor, former social worker, TEDx speaker and financial activist. And this, this is Bank On Your Neighbor, the podcast. You're probably here because you felt it too, that the system wasn't built for us. That building wealth shouldn't mean selling your soul to Wall Street or crossing your fingers every time a bank says no. That there has to be another way. Well, there is, and this podcast is my free gift to you. That's right. Free, no paywall, no audible subscription, no gatekeepers standing between you and the knowledge that can change your life. Because here's the truth, just because something's free doesn't mean it isn't valuable. Sometimes the most valuable things, clarity, empowerment, freedom, don't come with a price tag. They come with purpose. I created this podcast because I'm on a mission to decentralize wealth, to take power out of the hands of billionaires and put it back into our communities. Each episode is a chapter from my book Bank on Your Neighbor. Read by me. It's my way of making sure this knowledge reaches the people who need it most without a single algorithm getting in the way. We'll walk through the real strategies I use to go from dumpster diving in my twenties to building a multimillion dollar portfolio in my thirties without banks, without credit, and without compromising my values. We'll talk seller financing, community centered investing. And creative ways to build wealth that actually serve people, not exploit them. But this isn't just a podcast, it's a movement, a radical reclaiming of power, a blueprint for creating more community-minded millionaires and fewer billionaires extracting from our neighborhoods. Every chapter builds on the last, so I recommend listening in order. I'll drop links, visuals, and extra resources in the show notes to help you take action. Not just absorb information and if something in an episode strikes a chord, send it to someone you care about. That's how we spread financial literacy. That's how we grow a movement. That's how we rise together. Welcome to Bank on Your Neighbor. Welcome to the movement. Let's build something together. Chapter four, money. Myth number three. Debt is bad. Freedom lies in being bold, even with the debts you choose to carry. Apollo Colo. Before I understood debt as a tool for freedom, I saw how it was used as a weapon of control. And Sona gci, Coletta's largest red light district debt, didn't just ruin credit, it ruined lives. The streets of India buzzed with a kind of beautiful chaos, shoulders brushing rickshaw bells, ringing bundled babies crying. Vendors scoop steaming chai into clay cups. No bigger than a shot glass. Personal space was a luxury few could afford, but tucked into the city's northern heart was a place like no other Sona gci. Home to over 10,000 women trafficked into slavery trapped by invisible chains. No one could see debt and shame. It takes time to build trust. Carry my mentor said as we weaved through narrow alleys, greeting women and colorful sars who smiled from their doorways. When Asha called out to him, he grinned and motioned for me to follow. We climbed a ladder pressed against a wall up into a space barely larger than a coffin. Her entire life was packed neatly inside blankets, a few spices, a tiny altar still burning with incense over cups of sweet milky chai. Carrie shared her story. At 12 years old, ASHA's parents desperate for hope, had paid two men posing a school recruiters to give their daughter a better future. Instead, they sold her into a brothel. Every meal, every tattered dress, every train ride she took was added to her debt. A debt she could never repay on the dollar she earned per customer stolen into slavery. It was debt that now chained her. When I asked why she didn't just run, Carrie shook his head, even if she escaped, the shame would kill her before the pimps did. Her village would cast her out. In So Naot debt wasn't just a financial burden, it was a prison. It stole choice, dignity, and dreams, but there was hope free set. Now, Joya, the organization I volunteered with taught women new skills, stitching, tote bags, sewing shirts, creating an escape route, not paved with fear, but with income with every stitch, they were buying their freedom back. This was the first time I witnessed how capitalism wielded differently could heal instead of harm. It planted a seed in me. Wealth doesn't have to exploit. It can empower the lesson, hit hard. Debt can chain you or it can set you free. And here's why this matters to you. While most of us will never face the brutality, Asha did many of us live in a different kind of invisible cage. We rack up consumer debt chasing lives we don't even want mortgaging our futures for things that don't actually satisfy us. Debt can steal your freedom if you use it unconsciously. When used Wisely, debt can also build it. In this chapter, we'll entangle the difference. I'll show you how to spot the debts that enslave and how to leverage the ones that liberate. Let's get started. Meet bad debt. The myth that debt is bad is rooted in good reasons. As consumers, we are all too familiar with one side of the debt equation, the side that keeps us trapped. For example, we are encouraged to go to college in hopes of a brighter future. So the majority of us take on student debt. Sadly, three out of every four college students didn't fully understand what they were getting into financially before they started. Not to mention the cost of college has ballooned in the last four decades with prices rising by 153%. What once cost an average of $47,400 now exceeds 120,000 for a college education. What's the impact? Owning property isn't just a milestone in the American dream. It's often a first step out of the cycle of poverty, but it's getting harder and harder to own a home, and it's not just inflation. Notably, over half of non homeowners say that student debt is the main reason they can't afford to buy a home. Furthermore, surveys show that student debt forces 18% of millennials to take jobs they don't want, and 17% to take on a second job just to keep up. The less income someone has, the more likely they are to rely on credit card debt just to survive. And the cruel twist is the less you have, the more debt consume. For people already stretched thin. Even small debts can become heavy chains. Consumer debt keeps us trapped in the cycle of poverty. Working jobs. We don't like paying for things we don't need. Turning us into assets for debt collectors. Each time we take on another liability and listen, I get it. You might be thinking, if I just made more money, this would all disappear. But it doesn't always work that way. Enter lifestyle creep. The sneakiest little gremlin you didn't know you were inviting to the party. Lifestyle creep slides in when you get a raise or a bonus and whispers, you deserve that new car. Those new shoes, the bigger apartment. And you know what? It's not wrong. You do deserve good things. You deserve comfort, celebration, and breathing room. But here's where it gets tricky. If your spending rises every time your income does, you stay exactly where you are. Working harder, but never getting free. You're still running on the same exhausting hamster wheel just with fancier sneakers. And it's not because you're greedy or irresponsible, it's because the whole system is designed to keep you buying, upgrading and stretching just a little further than you can afford. It's emotional, it's human, it's survival mixed with marketing. None of this is about judgment. It's about waking up. Waking up to the fact that if we don't choose a different story, the old one will keep choosing us. Unchecked. Consumer debt isn't just a money problem, it's a freedom problem, and the first step towards getting free is seeing the trap for what it is. You're not broken. You're not bad with money. You've just been playing a rigged game designed to keep you stuck. The good news, once you see the trap, you can find the exit, but maybe you're staring at your credit card statement right now wondering, how did I even get here? Don't worry, you're not alone. And better yet, there's a way out. Here's a pro tip. Think of your debt's interest rate as its rate of return. I know it feels weird to put return and debt in the same sentence, but stick with me. If your credit card is charging you 15% interest, every dollar you pay off is essentially earning you a 15% return. That's better than most stock market wins, and it doesn't require insider trading or a PhD in cryptocurrency to pull it off. So when you're deciding whether to pay off debt or invest, just compare the numbers. If your debt has a higher interest rate than the return you'd expect from an investment, start with the debt. But sometimes investing in an asset that outpaces your debt's burden can be the smarter move. It's like chess. You need to think a few moves ahead. Now, if you're reading this and thinking, but I'm drowning in bad debt, no matter how hard I try, I'll never climb out. Don't panic. Take a deep breath and remember this bankruptcy exists for a reason. It's the financial equivalent of a reset button, a uniquely American one I might add, because who else would design a system where you can start fresh every seven years during bankruptcy? Most consumer debts are wiped clean, giving you a fresh start. Of course, not everything disappears. Student loans, for example, clean to you like glitter after a craft project. So if you're thinking about taking on student debt, make sure it's for something truly worthwhile. A degree in underwater basket weaving. Might sound fun, but maybe don't bet your financial future on it. Here's another pro tip. Just mentioning the possibility of bankruptcy to your credit card company can work wonders. It's the financial equivalent of casually saying, I'm thinking about moving out, and suddenly your toxic roommate starts doing the dishes, fixing the wifi, and asking about your day. Credit card companies want to avoid bankruptcy just as much as you do, so they're often willing to negotiate. Sometimes they'll slash your debt by half or more just to keep you in the game, and that's what I call leveraging your debt. Discovering good debt. While bad debt keeps us in the rat race, good debt sets us free. When I ventured into real estate investing, I often faced skeptics who asked, isn't it risky to have so much debt? What my friends failed to grasp was the power of leverage, a deliciously juicy money concept. Leverage is when you use good debt to make money more easily. I'll explain. Imagine you're playing on a seesaw. You're trying to lift a heavy weight on one end, but you're not strong enough. You ponder the problem. And finally, an epiphany. If you move the center of the seesaw closer to the heavy end, you can lift the weight more easily. That's leverage using a little effort to move something big with money. It's using a little cash to control a larger asset. Real estate is like that one overachieving friend who's good at everything. It doesn't just build wealth in one way, it does it in four. And the secret sauce leverage. When I bought my first duplex, I paid $16,000 to buy a property priced at 320,000. That's like reserving a five star hotel suite for the price of a motel room. Real estate is basically the Swiss army knife of investing. So let's unfold its tools one by one. First is appreciation. Simply put, this is the money you make when your property is worth more now than when you bought it. Think of it like scoring Taylor Swift tickets at face value only to find out they're worth 10 times as much on resale. Using my duplex as an example with a typical appreciation rate of 5% on a $320,000 property, I gained$16,000 in equity in just one year. Yep. I made my down payment back in appreciation alone. That's the power of leverage. It's like multiplying your money while barely lifting a finger. Keep in mind, sometimes the market goes down, so you can't always bank on appreciation to work out. Secondly, cashflow. This is the sweet, sweet sound of money jingling in your pocket every month after you've paid all your bills. My new tenant and my first duplex was paying me $1,200 in rent, which covered a big chunk of my $2,000 mortgage translation. Owning a duplex versus renting actually reduced my overall living costs. And my tenant wasn't just paying the rent, they were funding my retirement. Three principal pay down. Okay, principal pay down. Sounds as exciting as watching grass grow, but peer me out. It's magical. Each month on an amortized loan, part of your tenant's rent goes towards paying off your loan. It's like having someone ship away at your student loans while you chill on the couch. After a year, my tenants had paid down $6,000 of my mortgage. That's $6,000 closer to owning the property outright. And later in this book, I'll show you how to access that equity tax free. Yes, magic indeed. Four. Tax benefits. If real estate were a movie star, the tax benefits would be the adoring fan club. The tax code loves property owners showering them with deductions, depreciation, and other goodies. In my first year, I essentially earned tax free income thanks to Uncle Sam's little thank you notes for providing housing. Let's tally it up. Appreciation, cash flow principle paydown and tax benefits added up to $22,000 in gains. But how good is that? Here's how to calculate my rate of return. Subtract my initial investment from the total gains, $22,000 minus$16,000 equals $6,000 in profit. Then divide that profit by my initial investment and multiply by a hundred to find my rate of return.$6,000 divided by $16,000 times 100 is 37.5%, a 37.5% return in one year. Imagine asking your boss for that kind of raise. Leverage flexing its muscles. But here's the real beauty. The faster your money comes back to you, the sooner you can put it back to work. Creating an even bigger team of little financial soldiers marching towards your goals. But let's not get tunnel vision. Profit can't be the only compass guiding our investments. That narrow mindset is exactly what fuels the wealth gap and leaves our planet gasping for air. True financial freedom isn't about stepping on others to climb higher. It's about building wealth that uplifts everyone. When I first realized capitalism could actually do good, it was a light bulb moment. Stick with me and I'll share how you can make your dollars work, not just for you, but for your neighbors too. Because wealth when wielded with purpose isn't just power. It's progress when debt means freedom. After a year in my first duplex, I packed up and moved out making way for a new tenant who happily signed on at $1,600 a month. Now before you clutch your pearls, let me explain. It was a hundred dollars under market rent. How do I know six eager applicants landed in my inbox within the first 24 hours. It went faster than selling Girl Scout cookies outside of Weight Watchers meeting. Why the discount? Simple. I offer a hundred dollars off market rent to encourage tenants to stick around long term. Fewer move outs means fewer headaches for me and more stability for them. If they wanna break the lease to buy their own home, I waive the lease break fee entirely. Call me a landlord with a heart or someone who just believes that when everyone wins, everyone wins. Helping tenants become homeowners isn't a sneaky, ulterior motive. It's smart, sustainable, and exactly the kind of ripple effect I want to create. Financial freedom should spread around like confetti, joyful, abundant, and landing everywhere with both units rented, the property was bringing in $2,800 a month. While the bills stayed cozy at 2000, hear that it's the sweet sound of making money while I sleep. That meant I had $800 a month in cashflow. Even better, that $800 grows every year as rents rise, while the mortgage stays as steady as my grandmother's opinion of smartphones. It's a step-by-step march towards financial freedom, and with every rent check, I'm getting closer to my goal. Now, let's address the burning question. Why raise rent at all? I know, I know raising rent has a PR problem. Greedy landlords, people cry waving pitchforks and rental agreements. But here's the thing. Rent goes up for the same reason. Gas, milk and eggs do inflation every time. Politicians fire up the money printing press, the value of the dollar takes a hit, and the cost of living creeps upward like a sneaky toddler at bedtime. Remember all those COVID government stimulus programs. Yeah, that money didn't just sprout from trees like some magical fiscal orchard. It was printed. Every new dollar pumped into the system dilutes the value of the ones already in your pocket. Don't believe me. From 2021 to 2022, rents increased a whopping 24% directly after the feds printed one and every $5 bills during COVID. Now we need that fifth dollar to buy the same things. That's inflation. So the next time someone glares at you for raising rent, remind them that it's not landlords driving up the cost of living. It's the ripple effect of monetary policy. Sure, it's not the kind of thing you'd bring up over appetizers at a dinner party, but it will change how you see money in your own life. I'll dive deeper into inflation in later chapters. Now let's talk about the real dirty secret. No one mentions landlords who never raise rent. Why? Because in all my years as a top realtor, I've come to find there's one unspoken trade-off, low rent in exchange for ignored repairs. Over time, the tenant's living conditions decline the landlord's property value tanks, and everyone ends up with a, you get what you paid for failing. That's why I teach my coaching students to strike a balance, offer a fair discount to tenants as I do, but also raise rent regularly, not to be greedy, but for two very important reasons. Reason one, independence is empowering. This idea traces back to my social work days. When a landlord keeps rent artificially low for years, it can foster a subtle kind of dependency. The tenant becomes accustomed to the deal, and then one day the landlord sells the property or gets hit by a bus, leaving the tenant suddenly facing market rents without warning. It's like pulling the rug out from under someone who wasn't even wearing shoes to begin with. By raising rents gradually, tenants learn to navigate the realities of the market. They're encouraged to budget planned, and even take a leap into home ownership. In my world, promoting autonomy and independence is just as important as cashflow. Reason two, protect your property value. As a realtor, I know the value of property is directly tied to the income it generates. When you give a steep long-term discount, you're not just sacrificing cash flow. You're leaving tens of thousands of dollars of property value on the table. Sure, there are people who need subsidized housing and programs exist for that. But artificially suppressing rent may not be the best move for you or for your tenant. Still feeling squirmy about raising rent. Here's a creative way to give back without sacrificing property value or creating unhealthy dependencies. Set aside a small portion of the rent in a savings account for your tenant. When they move out, give them the funds. It's like giving them a financial trampoline to bounce into their next chapter with, after all, tenants only need saving when we think we're the hero. Better to save their autonomy and your humility with a dash of well-placed secrecy. Now, let's clear up a common misconception. When I moved outta my duplex and rented both units, the property stopped being a liability and became an asset. This concept confuses a lot of people, so let's spell it out. An asset is something that brings money into your bank account, often passively. A liability, on the other hand, is something that takes money out. Case in point, the last time I was tempted to upgrade my car, a well-meaning friend said, go for it. It's an investment. Bless their heart. But if I had a dime for every time someone confused an asset with a liability, I'd have enough for a real asset. By now. A shiny new car may look fabulous in your driveway, but it's draining your wallet, not filling it. Our consumer culture loves to muddy the waters convincing us that liabilities are actually assets. Language shapes how we see the world. And understanding this distinction can mean the difference between staying stuck on the hamster wheel of poverty and stepping onto the path towards financial freedom. So the next time someone calls their fancy car or designer handbag an investment, just smile and know you're playing a smarter long-term game. After acquiring my first duplex, I set a new goal. I wanted $5 million in debt. You heard me right? Sometimes for fun, when I'm on a date or someone new asks me a generic question about my life goals, I snag a napkin and write it down. If I could get $5 million in debt, that cash flowed, I'd be in good shape. I say glancing up to catch their reaction. Usually a furrowed brow, so I continue. Even a 1% cash flow on $5 million of debt would be $50,000 a year Passive. That's a social worker's salary In most states. I push up my imaginary nerd glasses, not to mention the annual principle paid on $5 million of debt, even at a 5% interest rate is another $50,000 a year. I add drawing a plus sign beside it, and don't forget the appreciation on all that good debt. Say at 5% I'd have another$250,000 a year to add to my net worth for a total of 350,000. By this point, they usually start to see my strange logic. Well, I admit this is a cheesy financial activist illustration. I can't help but hand over my blueprints to financial freedom. On a simple napkin, it usually sparks some good conversations. To recap, debt doesn't have to be the villain in your financial story. In fact, it can play the role of the hero when used wisely. Debt becomes leverage, the kind that accelerates your journey to financial freedom. I didn't always see it this way. Years ago, while walking the streets of Sonic gci, I saw how debt was used to enslave women, keeping them locked in cycles of exploitation. It was a harsh and unforgettable lesson. Debt can either imprison or liberate, depending on how it's wielded. Since then, I've learned to flip the script. I used debt as a tool to build wealth and create freedom, and so can you. It's not about avoiding debt altogether, it's about learning to make debt work for you. Because when you do, you're no longer just surviving, you're thriving, and that, my friends, is how you take back your power. In the next chapter, this realtor will try to convince you not to buy a single family home. At least not yet. The surprising truth about this quintessential element of the American dream buying a single family home is that this dream actually holds many Americans back. While buying a home is often a better alternative to renting, I'll reveal a little secret to building wealth that can accelerate your freedom.