Good Debt Vs. Bad Debt
The are so many facets of debt and not all of them are bad! I spoke about this last year and will touch on some of those points again, while adding some new ones too!
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Good or Bad Debt?
A few common types of debt marketed as good I believe instead fall into a grey area and can be good or bad depending on how they are used and handled.
Student Debt
Investing in your education and your future makes sense, right?
Well, not so fast.
With the price of a four year degree averaging near six figures in the states, graduates are leaving college with the equivalent of a mortgage payment.
Does this investment in yourself make sense still?
This answer can go both ways actually.
If you are getting a degree in a specialized program with a clear direct path to a job and the pay scale of that job justifies taking on debt, then yes it very well may make sense.
Example
My cousin got a degree in Supply Chain Management. It was catered to a very specific job that there was high demand for. In fact, she had a job lined up before she even began her senior year of college!
On the flip side, if you are getting a generalized degree (i.e, business administration, communications, etc.) its a different story.
I know more people that have a general degree working jobs that have no relation to their degree than ones who do.
In such a case, you are better off going to a trade school for a lot less money or even looking into careers that have apprenticeships where you get on the job learning.
Taking an Equity Line On Your Home
Many people have a chunk of equity in their home or investment property. They can gain access to this by taking a home equity line and essentially locking in the availability to that cash.
Isn't the point to get your house paid off though? Why would we want to pay more interest and go further in debt. That can't be good debt can it?
Again, it depends on how it's used.
Debt as Asset Protection!
Here is the thing about a home equity line. You don't have to use it. You can open it and it shows as a "liability" on the property even if your balance is zero.
So god forbid someone is injured on your property and wants to sue. They will not be able to go after the equity in your home because technically there isn't much there at all.
Thus asset protection using debt without actually having the debt.
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For me I believe investing in both sides are good. Investing in Crypto currency and also investing in Education are good.
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Investing on education can be on two categories: investing on someone education and investing on your education.
Investing on someone education can be a lose to you later when the person don't succeed.
But when you investing on your own personal education, you'll know what it takes and find all means to succeed to pay your debt.
From my perspective, there's no good or bad debt.
It depends on how you manage them, debts are bad if you don't plan enough, you don't plan the payback duration, how you're going to pay this debt, what good will this debt brings you, and how you're gonna make a profit out of this debt.