Why Debt is good? #UtangPaMore

“Yes!!!! I’m finally debt-free!”

This sentence was shouted happily by my friend. I can still remember the big smile on his face, to see him that happy gave a feeling that was almost indescribable. But then a thought came to my mind. I interrupted him and told him “Na, there’s nothing wrong with debt. In fact Rich People use Debt to leverage.”

Obviously I didn’t want to spoil his celebration of becoming debt free but I felt the need to explain. I told him that there are two kinds of debt Good Debt and Bad Debt. Let me tell you about them in more detail

Good Debt

As I said, rich people use febt to leverage – using OPM (Other People’s Money. They borrow money from banks or other institutions and use the money to expand their business. In order to see what your best option is, you must explore all of them.

It is considered “good debt” because the money will be used to buy an “Asset” In simple terms, An asset is something that will put money into your pocket. Investment is a good example, many people buy into stocks or securities like Terra kaufen. This asset will later give them money back when it increases in value.

One can even buy a car and it can be a good debt… how? By making it an uber, or as part of a service. If you are earning from it, then that’s an Asset, a Good Debt!

Bad Debt

Now, There is also Bad Debt. This happens when you borrow money and buy, for example, a new cellphone just to talk with their friends, a new laptop upgrade for computer games. That’s bad debt because you borrow money to buy a liability that isn’t earning anything back. Liability is something that takes money out of your pocket.

Bad debt can easily consume your life and your finances if you are not careful in managing them. We’ve all heard of the debt spiral, people borrowing money to pay debts, putting them in more debt. You can seek financial or bankruptcy advice from professional firms like Muldoon Britton or consult with debt solution services to break the cycle. But I think the best solution is to never let your bad debt get that bad in the first place. Of course, that can be easier said than done.

I told my friend Na that while the middle class are avoiding Debt, the rich are using OPM to further leverage. They are getting richer and the poor are getting poorer. This is the importance of Financial Literacy. A lot of people don’t know this as it’s not being discussed sa school. Na, now you know an Asset, Liability, and a true debt is now. strong>#UtangPaMore

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