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Debt can be a good thing

Ahhh, the perfect life … to be completely debt free!! That’s what we all want right?

My plan IS to be completely debt free, but not before having lots of debt first and then being able to pay it off. Investing in property will give me the debt but the investing will also allow me to pay off those mortgages and live a debt free lifestyle.

It’s a terrible word when you think about it .. it doesn’t even sound good.
And for a lot of people, they have sleepless nights worrying about the debts that they have. Whether they be mortgages, car loans, personal loans, credit cards or even education debts. But as a property investor, you need to be really comfortable with debt because it’s almost certain that your life will include a great deal of debt over a long period of time.

It wasn’t until I understood the difference between good debt and bad debt that I really grasped the concept of being comfortable with it. I started WANTING more good debt because it made sense and I knew that it was working for me to build long-term wealth.

Let me explain the difference between good debt and bad debt:

GOOD DEBT
– money that you borrow to pay for items that grow in value
– money that works FOR you and actually makes you money
– you can claim the interest costs
– take your time to pay off this debt

For example – an investment property or a profitable business

BAD DEBT
– money that you borrow for items that usually go down in value
– money that you borrow that IS NOT making you more money
– you can’t claim the interest costs
– get rid of this debt as quickly as you can

For example – cars, jet skis, TV’s, personal loans or store credit cards

The more good debt you have, the better, because it’s likely to be linked to an asset that is making you money! And for me personally, I sleep just fine at night knowing that the large amount of debt I have is working for me to create long term financial freedom.

The reality is that most of us cannot live entirely debt free. I encourage you to get rid of the bad debt … as fast as you can. But on the flip side, don’t be afraid of good debt. You need to shift your mindset from what we’ve been brought up thinking that “debt is bad” to knowing that “the right kind of debt is good”. When it comes to property investing, you need to look beyond the actual loan (the mortgage) and think about how it is working for you – generating an income or being linked to an asset that is growing in value.

Here’s another thought to consider; if you don’t like or want debt of any kind, what’s the alternative option for you? Do you think that you can ‘save’ your way to a million dollar lifestyle? If you spent the next 20 years saving every spare cent you have (which isn’t much at the end of every pay is it?), how much money do you think you could accumulate? The short answer … not nearly enough!

So given you can’t save your way to riches and fortunes, let’s go with being OK and getting comfortable with some ‘good debt’.

Now that you understand the difference between good and bad debt, you’ll be able to assess your own financial situation and consider what action you need to take to have more of the good and less of the bad.

And remember, paying off even the smallest bad debt is a step closer to your financial goals.

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