Good Debt vs. Bad Debt

 

 

When it comes to taking on personal or non-business debt, many people, even so-called consultants, will tell you that there is “good debt” and “bad debt.”  Wrong! 

 

Please don’t buy into the “good debt” / “bad debt” discourse.  ALL personal debt is bad!  Now I am not necessarily talking about a home mortgage, but even that should be paid off in 15 years or less (don’t buy into the nonsense that you are using “other people’s money”).  If you cannot make the payments on a 15-year mortgage however, you are probably buying too much house.  My recommendation is to limit your home mortgage to 15 years and then do everything in your power to shorten that debt period by making extra payments toward your principle balance.

 

Yes, at times we are swayed into a purchase because we don’t have the cash, but that does not make the debt good! 

 

Some go into debt for so-called investment purposes.  They are buying second homes, seaside properties, even speculating in commercial development or in the house rental market.  This is a volatile place to put your personal finances.  Unless you have substantial cash available to cover for an enormous potential loss in income, run away from such so-called investing.

 

 

Your thoughts on this subject?  Your comments appreciated!

Content © Rich Brott, 2011

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