Good Debt, Bad Debt?

Let's settle this once and for all: Is debt good or bad?

Truth is: we might be asking the wrong question...

After helping countless clients navigate debt decisions, I've discovered there's a much better way to think about it.

But first - let me show you what debt is ACTUALLY doing to your financial freedom, because most of us have heard of "good debt" and "bad debt" but very few of us have seen exactly how it works in action...

The Truth Behind the Numbers

Bad debt typically involves borrowing for depreciating assets (things that rapidly decrease in value) or consumption (day-to-day stuff), often at high interest rates. Let's dive in!

(Quick note: The figures I'm about to share are examples to illustrate the concepts - actual interest rates, appreciation rates, and business performance can vary significantly based on market conditions, location, timing, and many other factors. Always get professional advice and run your own numbers for your specific situation!)

Credit Card Example (and this one might sting a little):

 $5,000 credit card at a whopping 18% interest rate

Minimum monthly payment: $150

If you only make minimum payments:

Takes an eye-watering 4 years to pay off

You'll burn $2,340 in interest

Those "bargains" you bought? They're either worthless now or long gone – meaning that $5,000 shopping spree actually cost $7,340!

 Car Loan Example :

$25,000 loan at 6% APR

Monthly payment: $493

After 5 years:

Interest paid: $4,599

Car value plummeted to $12,500 (yep, cars drop 10-15% per year!)

You're sitting at a negative $17,099. Ouch!

 Now, let's look at some smarter uses of debt...

Mortgage Example:

 $300,000 mortgage at 5% interest

Monthly payment: $1,610

The home appreciates by 4% annually

After 10 years:

 Home value jumps to $444,227 (from $300,000)

Principal paid: $73,935

Interest paid: $119,265 (remember, this drops if you pay extra!)

You've gained $144,227 just from appreciation

That's a positive $24,962 net position - now we're talking!

Business Example:

Small vending machine business with 5 machines for $25K:

 Purchase price: $25,000 for 5 established machines

Business loan: $25,000 at 8% interest for 5 years

Monthly loan payment: $507

The Money Breakdown:

 Each machine bringing in $650/month

Total monthly revenue: $3,250

Less Monthly costs:

 Restocking: $1,300

Location fees: $250

Maintenance: $100

Total costs: $1,650

The Sweet Spot:

 Monthly profit before loan: $1,600

After loan payment: $1,093 pure positive cash flow!

 After 5 Years (this is where it gets good):

 Interest paid: $5,420

Total revenue: $195,000

Less operating costs: -$99,000

Less loan payments: -$30,420

Net profit: $65,580

PLUS you still own those money-making machines earning $1,600 monthly!

Isn’t the difference so much clearer when you see it broken down like this? 

This is why I'm always preaching about ownership - because while majority of people are using debt to get more 'stuff', the wealthiest people are using debt to get ahead!

Yes, there's always risk - I'm not telling you to rush out and load up on debt for properties or businesses without getting educated and getting advice.

But you know what's really risky? Racking up credit card debt for things that won't mean anything to in two months. Then getting so deep that all you do is work to pay off stuff that isn't even exciting anymore.

And when the debts paid? There’s nothing to show for it except maybe some worn-out items that need replacing - and the cycle starts all over!

So if you have some debt to tackle right now that is holding you back, let me help you develop the concept of a better framework for thinking about debt.

The key shift is from "good vs bad" to thinking about "productive vs consumptive" debt.

Will this debt help me build wealth or generate income? Productive. (Like that business that could change your life)

Am I buying something that'll be worthless while I'm still paying for it? Consumptive. (Like that 'must-have' gadget you'll forget about next month)

Will this purchase actually pay for itself? (That's the real secret sauce!)

Because here's the truth: While everyone else is drowning in debt buying things they don't need to impress people they don't really like…

You could be building an empire. Your debt could be funding your freedom instead of funding your frustration.

The real question isn't whether debt is good or bad - it's whether your debt is working FOR you or AGAINST you.

That $5,000 business line of credit for inventory that sells out in 30 days at a 100% markup? That's your debt soldier working for you!

That same $5,000 for furniture you'll be paying off until it's outdated? That's you working for your debt.

The choice is yours - will you keep do what everyone else is doing and wonder why it keeps you stuck?

Or are you ready to start using debt the way wealthy people do - as a tool to build the life you've always dreamed of?

Your future is waiting. The only question is: Are you ready to own it? 🚀

👋 Hey! Your vote helps me help YOU - I'll be crafting future tips and strategies around whatever challenge wins above👆. So don't be shy, let me know what you're dealing with!

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