Debt. Is it a good thing?

In my previous post, I talked about a few simple ways to curb spending and to avoid burying ourselves with debt. Well, is debt really a bad thing? To be honest with you, as far as I know, there is no rich human being in the world who got to their position without any assistance of debt. Minus celebrities and those who got rich by inheritance of course.

Debts can be categorised into two. One is Good Debt and another is Bad Debt.

Main difference between these two is that by their ability to make us wealthier. Bad debts are debts taken by us to purchase things that do not appreciate in value. In fact, most of these items depreciate in value. For example, car loans, personal loans, Court Mammoth’s loans, Harvey Norman’s loans, and etc. Stay away from bad debts!

Good debts on the other hand are debts that are obtained by us to purchase assets or things that can appreciate in value which then increases our net worth. For example, taking up debt to buy shares, properties, managed funds, unit trusts, and etc.

I do agree that sometimes, we can’t escape ourself from bad debts. I mean, how many people are able to purchase a car and pay cash in one go? The rule is to stay away from bad debts if you can. If you can’t, you need to know how to manage your obligations properly.

In my next entry, I’ll try to address the question of taking loan to invest in ASB.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. Ahmad Nasri says:

    Oh well, I have a big debt. I pay it with 10 years of service. What do you think nadlique? Is that a good debt or a bad debt?

  2. haha. nasri. tak sangka jumpa kau kat sini. ko punya kes… hmmmm, good debt la kot. dapat gaji ape. hehe.

Trackbacks

  1. […] are bad debts? Well, refer to a previous entry on what I’d consider as a bad debt. Basically, when you take out a loan to purchase things […]

  2. […] are bad debts? Well, refer to a previous entry on what I’d consider as a bad debt. Basically, when you take out a loan to purchase things […]

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