Is Debt really bad or is it GOOD!

[Anomalous]

The author of "Rich Dad, Poor Dad," (Robert T. Kiyosaki) says that debt is actually a good thing!! Can you believe this, he says that his "friend is one of those guys who thinks debt is bad, which is moronic..."


I haven't been able to understand why debt is good. Could any of you elaborate on this

 

[Ace of Flames]

I've found that that guy has no credibility and is a pretty lousy man in general.

You know how he made all his money? From selling books about making money. Just forget anything you've read or heard from him.

 

[Bible_Belt]

Debt can be either good or bad. A rule of thumb is to never finance an asset that either depreciates or does not generate income. The new American way is to saddle one's self with enough monthly payments to eat up every pay check, usually on shiny things and luxury items that are not needed. Obviously in this way, debt is bad for many people. However, it is hardly possible to own real estate or start a business without carrying some kind of debt.

 

[RedPill]

bad debt = consumer debt
good debt = investment debt

It's that simple.

Consumer debt is debt used to finance items that either depreciate, or do not give you a positive cash flow which exceeds the purchase price at some point in time (ROI - Return On Investment). Examples would be a car, primary residence, all the junk that fills Middle America's garage, and just about anything you can find at Sam's Club.

Investment debt is the exact opposite. It's debt used to finance items that contribute to the growth of an asset, or give you a positive ROI. Examples would be a rental property, investment property, capital used to finance a growing business, or some other growth vehicle for money.

 

[insanity]

dual citizenship rocks. i am messed up my credit report in canada with mega debt. once i start making the bucks i'm going to pay the government back. but i'm also fortunet to have a second credit report in the states and it is clean and i'm not messing that one up.

debt is good. it made me smarting up for the states not to mess a good thing up...

 

[Teflon_Mcgee]

You don't have to believe Kyosaki.
But woud you listen to Donald Trump?
He's gone so far into debt it's ridiculous. But he maintains it's good.
I'd be inclined to agree.

 

[The Bad Ass Canadian]

Bad debt = Credit cards and monthly payments on material things that don't generate any passive income for you.

Good debt = Investment debt that gives you a return greater than the monthly payment. an example would be buying property and renting it out to tenants. Your mortgage would be 1200$/month (hypothetical) and you'd charge 1800$ for the rent so you'd be making 600$ per month profit instead of paying for the 1200$/month mortgage. That's a hypothetical but shows how this is good for your pocketbook even though on paper you're still in debt til the mortgage is paid off.

 

[check_mate_kid_uk]

I will never buy a book on how to make money, some self help books are usefull, but there is something very wrong with books on how to make money. Why? you ask, well because if the author was so good that he actualy knew what he was talking about, he would not be writing books about it for money, he would just go and do what ever it is hes telling us to do.

When is the last time oyu saw a book by Rupport Murdock or Richard Branson on how to make money, these people are highley succesfull, yes they realese books, autobiographies, but they dont bullsh!t us about how to make money!

 

[Le Parisien]

Listen to what Bible_Belt, RedPill and The Bad Ass Canadian said and you will be good.

 

[GirlCrazy]

I'm closing 2 loans in the next 30 days, and debt is my new best friend. I agree with the posters who say that real estate debt can be a really good thing. If used right, debt is simply leverage. If used wrong, well, you leverage yourself into a black hole.

For example, my sister probably has a debt around 1.5 million. But if you add the value of all her properties together and subtract what she owes, she comes out with a positive net worth, not to mention positive cash flow (direct income), appreciation (indirect income) and all the tax benefits.

Assets (stuff you own) - liabilities (money you owe) = net worth

Your net worth should be your main focus. Most people have a negative net worth, which is sad.

 

[The Bad Ass Canadian]

I'm closing 2 loans in the next 30 days, and debt is my new best friend. I agree with the posters who say that real estate debt can be a really good thing. If used right, debt is simply leverage. If used wrong, well, you leverage yourself into a black hole.

For example, my sister probably has a debt around 1.5 million. But if you add the value of all her properties together and subtract what she owes, she comes out with a positive net worth, not to mention positive cash flow (direct income), appreciation (indirect income) and all the tax benefits.

Assets (stuff you own) - liabilities (money you owe) = net worth

Your net worth should be your main focus. Most people have a negative net worth, which is sad.

Great post.

Robert Kyosaki, regardless of what many of you think, is spot on with his info. His cashflow quadrant is simple but brilliant.