Debt is a necessary part of life, and it’s important to understand the difference between good and bad debt. Good debt is used to purchase assets that generate income and/or increase in value over time. Bad debt, on the other hand, is used to purchase items that depreciate in value and don’t generate any income.
Good debt is typically used to purchase assets such as rental property, stocks, and bonds. These investments can generate income and increase in value over time. This type of debt is typically considered an investment and can be beneficial in the long-term if managed properly.
Bad debt is typically used to purchase items such as cars and consumer goods. These items often depreciate in value and don’t generate any income. This type of debt is often referred to as “toxic debt” and should be avoided if possible.
When considering taking on debt, it’s important to understand the difference between good and bad debt. Good debt can be beneficial in the long-term if managed properly, while bad debt can be detrimental to your financial health. It’s important to weigh the pros and cons of taking on any type of debt before making a decision.
