Debt Isn’t Bad (or Good), Painful Truth Is You Don’t Know How to Use It Right

All of us know people who got in over their heads, to the point that they don’t see a way out. They just keep paying far too much of their income just to “service” that debt, i.e., paying the minimum, which guarantees they’ll pay the most possible to their creditors.

Debt Isn’t Bad (or Good), Painful Truth Is You Don’t Know How to Use It Right

In his opinion, any positive result you can get from debt is completely undone by the risk. There’s an expression in Hebrew that roughly translates to, “A cat once scalded by boiling water is afraid of warm water.”

“Debt Is Dumb” – Ramsey Solutions

“Stop Calling it ‘Good Debt’” – Sam Dixon Brown

However, he points out, “The prudent use of debt to invest in stable, cash-producing assets is a great way to turbocharge your returns and even get rich.” For example, using mortgages to buy residential rental properties, which is how he is building his wealth.

However, even if you know how to use it correctly, anytime you do there’s some risk you’ll make a mistake and hurt yourself or someone else. That’s why you don’t use it to cut a piece of lumber that you can cut more safely with a circular table saw or even a handsaw.

Debt Is a Powerful Tool, Use Cautiously and Only When Appropriate

Payday Loans

Yes, payday lenders are notorious for charging inordinately high interest rates, and their “customers” far too often get trapped, having to borrow again and again, continuing to pay those unconscionable interest rates.

I routinely charge thousands of dollars rather than pay cash. However, I don’t use them to pay for things I couldn’t pay in full upfront. I don’t use them for my credit history. And, I don’t charge any more than I would pay in cash.

Credit Cards

As Le Fort notes, these carry lower interest rates than credit cards (let alone payday loans), so they can help you reduce your interest costs if you’re carrying balances on high-interest credit cards. However, using these to buy stuff you can’t afford is a bad idea.

Personal Loans

Cars are well known to be depreciating assets. Taking out an auto loan at high interest to finance an expensive car isn’t smart.

Auto Loans

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