Warning: this content is older than 365 days. It may be out of date and no longer relevant.

One of the greatest lies ever told to people is the fallacy of good debt/bad debt.

“A mortgage is good debt! It’s an investment that will pay off!”
“A college education and student loan is good debt! It’s an investment in yourself!”
“A credit card is bad debt! Stuff you buy with a credit card doesn’t increase in value!”

Let’s break this destructive lie right now.

There is no such thing as good debt or bad debt.

There is only debt you are capable of managing financially, and debt you are not capable of managing financially. Are there things you’d like to buy or invest in that have a larger probability of paying off dividends in the future? Of course. Few would argue that a college education or a house to live in are wastes of money. But implying the value of a debt is equal to the value of the investment is a dangerous fallacy. It’s one of the main reasons we’re in the financial situation we’re in now.

Which is better? A diamond that increases in value paid for with cash, or the same diamond paid for with credit? The diamond is the same. How you pay for it is the difference. To be sure, there are some things in life which are exceptionally difficult to obtain without using a debt vehicle, like a house. That said, the mortgage on that house isn’t inherently good because the house might appreciate in value. The mortgage on that house is only as good as your ability to repay it without going broke.

Before you borrow, see your financial picture clearly, and break away from the fallacy of good or bad debt.

Did you enjoy this blog post? If so, please subscribe right now!

Bad debt, good debt, and the great financial lie 1 Bad debt, good debt, and the great financial lie 2 Bad debt, good debt, and the great financial lie 3

Get this and other great articles from the source at www.ChristopherSPenn.com

10 most recent blog posts of mine:

Subscribe to RSS headline updates from:
Powered by FeedBurner

Subscribe to My Free Weekly Newsletter

Subscribe to My Free Weekly Newsletter

Sign up now to the free Almost Timely Newsletter, released every weekend with the latest news about marketing, technology, analytics, data science, and AI.

  • This field is for validation purposes and should be left unchanged.

You have successfully subscribed to the Almost Timely Newsletter!