Good Debt vs Bad Debt - Tangible vs Intangible Investment

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Kenneth Ewoigbe
Motivational Speaker, Business Entrepreneur/Developer,
Webmaster, Internet Entrepreneur, Manpower Developer,
Human Capacity Developer,
Systems Consultant, Content Writer,
Fashion/Car Enthusiast

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Good Debt/Bad Debt

So what exactly is good debt vs bad debt, and how can you use it to your advantage?

Good debts are debts that are necessary, sustainable and which have the capacity to improve your life, that is productivity and pocket. On the other hand, bad debt is not just unnecessary but totally unsustainable.

Examples

If you borrow to go to school and prepare yourself for a better future, good debt. You can't quantify knowledge, and your knowledge can return what you borrow in multiple fold.

Consumer purchases are NOT investments; beds, cars, tvs, kitchen gadgets, clothing, - anything that naturally depreciates. When you borrow to get such items, you can safely classify as bad debt.

Now, let me make it simpler. Good debts are those things you cannot afford to pay for without wiping out your cash but which can return in multiple fold after you have them.

A good example is property. You've got 300,000 - the property is 300,000. Instead of wiping out your cash reserve, you do a down payment of 50,000 and service the rest over 12 or 24 months. Now that makes sense. Same goes for machinery for your business. Egg incubators for your farm, tractors, drilling machines etc.

Now, don't confuse yourself into thinking your tab is good debt if all you do is view movies and play games on it. Good debts generally have an inherent ability within them to pay for their own cost.

Playing games and seeing movies won't pay the bills. Or will it?

How do you use good debt in your favour?

Simple. Go into debt for things with a super ability to jump start your bank balance/networth. How? Till I write to you again tomorrow.

Until then I say unto you my good friend, Chao!