Debt is a complicated factor in life. Unfortunately, more of the population is in debt than out of debt. This means that people don’t understand the impact of debt and what it does for your life. It means that the majority people need a better financial education so that they will learn how to manage their money. Learning how to properly manage your money is extremely important. If you don’t learn to manage your money then your money will manage you.
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The Misunderstanding
When it comes to debt, the difference between good debt and bad debt is vastly misunderstood. Many people believe that good debt is any kind of debt that they use to better themselves. Things like a house, student loans, and even car loans are considered to be good debt. The trouble is that this debt is not good. Debt is bad because it means you owe someone something. When it comes to debt, the borrower is slave to the lender. Do you want to be a slave? I don’t think so! So get out of debt!
Good Debt
That being said, there is one type of debt that is considered good debt no matter what. This is the type of debt that you use to make money. People like Warren Buffet, Donald Trump, and Robert Kiyosaki all use good debt to make millions of dollars. However, they have also all lost millions of dollars doing so. Therefore, there is a significant amount of risk involved, which is why a good financial education is very important.
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Good debt is a loan that you receive for investment purposes. It is debt that you monitor closely and watch like a hawk. You use this debt as leverage so that you can make more money faster. As they say, it takes money to make money. How you invest this money is up to you, but wherever it is invested, you must be making more than your interest rate on the loan. In addition, you need to make sure you completely understand all aspects of the investment. Then, once you start making money, you need to pay the loan off as soon as possible.
The Outcome
Remember, the borrower is slave to the lender and you don’t want to be a slave. Therefore, try to stay away from debt and do all you can to increase your financial education. If you do go into debt, only do it for an opportunity to use the money to make more money. If you are already in debt, don’t worry. Focus on getting out of debt and becoming more financially educated. You can check out my articles on debt relief and debt consolidation for some more information. Once you are debt free, you may choose to use future debt as leverage to make more money.
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Thank you,
Spencer Coffman
SpencerCoffman.com