The Difference Between Bad Debt and Good Debt

Today, I wanted to take a moment to talk to you today about debt. I am hearing a lot of confusion when it comes to credit. There is a big difference between good debt and bad debt. If you didn’t know that good debt was a thing, I’m here to tell you it most definitely is. So what’s the difference?

Bad debt is when you take on a debt to purchase A liability.

A liability is something that doesn’t increase your net worth, things like overpriced clothes, shoes, and bags. Liabilities are things like fancy electronics and ridiculously expensive cars that depreciate as soon as you drive them off the lot.

Good debt is when you take on a debt to purchase An Assest.

If you are taking out a business loan to invest in your economic venture or student loans to invest in your intellectual pursuits, that’s good debt. You just need to make sure that you have a strategy in place to ensure you’re actually able to utilize that debt to maximize the asset that you set out to acquire.

Good Debt is Good

Good debt is supposed to be something that you utilize when you know that taking on that debt is going to catapult you to a position to make you better off than you would be otherwise! An infusion of capital can be a tremendous tool for growth when employed properly. Investing in yourself and investing in your business are smart things that you should be doing. Understanding how and when to leverage debt can help you succeed in accomplishing your goal.

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