I read a comment recently that rephrased this good vs. evil debt mentality in the most perfect way: debt is not good or bad – it is profitable or unprofitable.
Student Loan Debt
I’ve personally never had any student loan debt so I don’t know what it feels like it to have it hovering over my head. But going through the theory of profitable vs. unprofitable debt student loans could fall into either.
Your student loan debt is profitable if:
Your degree helps you land a job that pays higher than you could get without a degree. (Because we know that not all degrees are going to score you a high paying job.)
You use your student loans to pay for tuition and related expenses.
If you’ve used your student loan debt to finance a lifestyle that you shouldn’t be living right now then your student debts are not profitable.
Use your student loans to advance your career, earn decent money, and only use them to pay for necessary college expenses and you’re looking at profitable debt.
Consumer Debt
Consumer debt is the absolute most unprofitable debt that you can have. If you’re using credit cards and other personal loans to finance your life you’re living beyond your means and are setting yourself up for financial disaster.
Stay away from this type of debt.
Mortgage Debt
Mortgage debt is a big toss-up. If you plan on living in one place all of your life, purchasing a house may save you money in the long run over renting.
However, if you’re not staying in one place forever and at some point need to sell your home you could lose a lot of money if housing prices drop. OR you could make a small profit when it came time to sell.
Mortgage debt is one that comes down to individual circumstances although I would argue that it definitely leans more toward the unprofitable side of the equation.
Investments
Debt becomes the most useful when it comes to investing. Many investors have built their wealth by leveraging debt and purchasing real estate.
Other ways to use debt to its advantage is when you’re investing in yourself in a way that produces tangible results or using that money to grow your business.
Bottom line: debt isn’t good or evil. When you intentionally use it to its advantage it can be a tool for building wealth. If you use it in an irresponsible way it can be a path to financial disaster.
source: everybodylovesyourmoney.com
