Last time we talked about bad debt and defined that as money spent on items of depreciating value that are often used to create the appearance of wealth. Nothing wrong with buying yourself nice things but using your credit card to accumulate this kind of debt is a slippery slope.
So, what it good debt? Good debt is commonly defined as that which generates cash flow or allows you to purchase a commodity that will increase in value. For example, let’s say you buy a car or van, which you use to increase your business. That would be considered good debt. Another example is the house you live in. Over time, the mortgage gets paid off and you are the owner of a valuable asset, often-times worth much more than what you paid for it.
While we have been calling all this stuff today good debt, and it certainly is better than bad debt, good debt of this sort is still not making your money work very hard. You are, at least, getting something of value in return for your indebtedness but these sorts of strategies are very inefficient. Your money is not working nearly as hard as it should be and it’s probably not enough to reach the land of financial independence.
What you need to concentrate on is accumulating great debt. That’s what we at Empowered Investor Network love and that’s what we recommend to our customers, clients, and anyone else who wants to create wealth no matter what the economy is doing.
Next time – great debt!
