good vs bad

Good/Bad Debt

Out in today’s world, there is this idea of good debt and bad debt. For a very long time, I fed into this idea myself. We categorize our debt into these two sides with the thought that it is ok to have good debt and bad debt should be avoided as much as possible.

From my previous understanding of it, good debt was for things such as mortgages so that you have a roof over your head, student loans so that you can get yourself a quality education, auto loans so that you can have a nice, reliable car to drive. On the other end, bad debt was the category for credit cards, payday loans and personal loans.

I do see the logic here. When you sum it all up, bad debt was caused by things you purchased and knew you could not afford while good debt was for things that are expensive that everyone borrows money for. I believed this for most of my life.

Now that I am viewing finances with fresh eyes, the “good” and the “bad” have faded away. So what is left? You guessed it, debt and more debt. According to Webster’s dictionary, the word debt simply means “something owed”. The words “good” and “bad” in this sense are adjectives. The debt is still the main point. There is no such thing as “good debt” and “bad debt”. These are simply just terms that we assign to make us emotionally feel better about what we owe.

I know many of you may disagree with me, and that’s ok. We are not all going to have the same views. Let’s look at it another way. Let’s say that Sally has a $20,000 student loan. Good debt, right? Now let’s say that Joe has $20,000 in credit card debt. Bad debt! So the question becomes, who’s better off financially? The one who owes $20,000 or the one who owes $20,000? I think you are seeing the picture I’m painting here.

Some of you may be thinking, “Yes, mathematically both Sally’s and Joe’s situations work out the same, but Sally has a degree and has the potential to earn more money”. This is true, but it is not a guarantee. For all we know, Joe has fulfilled his passion for opening his own restaurant that is very successful and gives him a salary of $100,000 a year. Whereas Sally has earned her degree in underwater basket weaving and cannot find work (that is a blog post for another day).

The point here is, debt is debt no matter how you look at it. No matter how much you owe or what you owe it for, make it a mission to pay it off as quickly as possible. The faster you pay off those debts, the faster you start building wealth.


I always welcome feedback, questions, comments and concerns. Please feel free to comment below or you can also reach me directly at

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