Debt sure has a bad reputation theseAbundance
With Money Review days. Every time I pick up a newspaper, all I see are articles about the "sovereign debt crisis." When I turn on the television, I'm bombarded with commercials from companies offering to help people with their "debt troubles." I can understand why many people today see debt as a disease, something to avoid like the plague. That's too bad, because I think debt is one of the greatest inventions of all time, and probably the best tool we have for building wealth.
There's no question: Many individuals and even some large governments today are struggling with debt. However, debt is not responsible for all the misery, the individuals who used the debt are at fault. Debt is not something that is good or bad in itself. How debt is used determines whether an outcome is good or bad. Similarly, fire is not good or bad in itself, but how fire is used determines whether an outcome is good (i.e. a campfire) or bad (i.e. a forest fire). Debt and fire also have another thing in common: When used incorrectly, you can get badly burned.
Let's look at a definition for debt. In basic terms, debt is a promise between a borrower and lender, where the lender gives money to the borrower, and after a period of time the borrower gives the money back with interest. Some financial experts classify debt as either good or bad depending on what the money was used for. For example, money that was borrowed to buy something that is expected to appreciate in value (like a house or investment) is considered good debt. Borrowed money used to buy something that depreciates (like a car, TV, or vacation) is typically considered bad debt.
There's no question: Many individuals and even some large governments today are struggling with debt. However, debt is not responsible for all the misery, the individuals who used the debt are at fault. Debt is not something that is good or bad in itself. How debt is used determines whether an outcome is good or bad. Similarly, fire is not good or bad in itself, but how fire is used determines whether an outcome is good (i.e. a campfire) or bad (i.e. a forest fire). Debt and fire also have another thing in common: When used incorrectly, you can get badly burned.
Let's look at a definition for debt. In basic terms, debt is a promise between a borrower and lender, where the lender gives money to the borrower, and after a period of time the borrower gives the money back with interest. Some financial experts classify debt as either good or bad depending on what the money was used for. For example, money that was borrowed to buy something that is expected to appreciate in value (like a house or investment) is considered good debt. Borrowed money used to buy something that depreciates (like a car, TV, or vacation) is typically considered bad debt.
Comments
Post a Comment