Let’s get something straight: not all debt is created equal. There is good debt, which gives you an opportunity to make money and there is bad debt, which you continue to dump money into with no expectation for return. While the differences can be subtle, anybody trying to become more financially literate must know the fundamentals behind good debt vs bad debt.
When talking about personal finance, particularly when the topic of budgeting comes up, all you hear about is debt, debt, debt. Like most Americans, you begin to wonder what to do because everyone in America it seems carries debt and everything “worth having” requires you to go into debt.
This is the how the story typically goes. You go into debt to get an education. Then, you go into debt to get married. Next, you buy a house and take on a huge mortgage.
This is when I borrow money to make more money.
For example, I borrow money and buy an investment home. I call this home an investment because I rent it out. Each month, my tenant pays my mortgage, taxes, and insurance in the form of rental income. My borrowed money gets paid back without me. Each month, I begin to gather equity in the home and, if I made a good investment, a little extra cash in my bank account.