Is Debt Evil?

Debt: One of the most emotionally and financially complex parts of people’s lives. Its impact is unique to each family.

Many prominent financial gurus are quick to claim that debt is a form of evil, and not one red cent should ever be borrowed.

Others claim that debt is the tool of business titans, and the fastest way to achieve wealth.

So, which is it? Could both ways of thinking hold kernels of truth?

As with most things in life, the truth lies somewhere in the middle. It can lead to great pain, and great reward, and the most important thing you can do is find the balance by understanding it.

Photo by Avery Evans on Unsplash

How can Debt hurt you?

You might not need any reminders of how debt can cause pain. You might have experienced this yourself, or know someone who has.

Currently, $462 billion of debt is delinquent in America. In total, consumer debt in America is at $14.56 trillion.

With so much debt, and so much pain caused by it, there is cause for concern.

Credit cards and payday loans, which many find necessary for survival, have high interest rates. Investments available to every day investors lag far behind these rates. Because of this, high interest debt creates a drag on net worth.

You might be saying, “But wait, there’s other kinds of debt, without as much interest!” You’d be right. And that’s where debt can actually help build wealth

How can Debt help you?

When asked how he got so wealthy, John Getty, the world’s first billionaire, said the secret was “OPM: Other People’s Money.”

This is the reason why there needs to be a distinction between good and bad debt. Some debt can actually help you get richer!

Think of it this way:

Imagine you borrow $100, and turn it into $200. Even after you pay back the money you borrowed, you’ll still have made a profit.

This is a simplified version of how billionaires became so wealthy: They borrowed money, and used those funds to supercharge their growth.

You might be thinking that these same tools aren’t available for normal people, but they are! Mortgages are a great example of being able to borrow large amounts of money to supercharge your wealth.

So what’s the verdict on Debt?

It’s easy to paint debt as entirely good or evil, but as with so many things in life, the truth lies somewhere in between.

Used incorrectly, debt can expose people to too much risk, or seriously drag down the growth of net worth. But used correctly, debt can help a person master their finances and secure their financial future.

If you’re interested in how debt can help you grow your wealth, click here to register for a FREE Bronze account. A licensed financial advisor will reach out to meet with you to help you determine what kind of leverage would best suit you.

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