Comments on: Is There Such a Thing as “Good Debt”? http://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/ Personal Finance for Geeks from the Debt Snowball to Homemade Air Conditioners Sun, 05 Feb 2012 16:55:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Financial Uproarhttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-11275 Financial Uproar Sun, 21 Mar 2010 18:08:25 +0000 http://www.fiscalgeek.com/?p=2055#comment-11275 The abuse of debt isn't a good thing, whether it's good debt or bad debt. But to say that good debt isn't good because people abuse it is an insult to the millions of people in North America who use debt intelligently. Debt itself isn't the problem; the problem is people using it incorrectly. The abuse of debt isn’t a good thing, whether it’s good debt or bad debt.

But to say that good debt isn’t good because people abuse it is an insult to the millions of people in North America who use debt intelligently. Debt itself isn’t the problem; the problem is people using it incorrectly.

]]> By: Kevin@OutOfYourRuthttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-11181 Kevin@OutOfYourRut Sat, 20 Mar 2010 21:41:21 +0000 http://www.fiscalgeek.com/?p=2055#comment-11181 Financial Uproar - I agree with your reasoning. Incurring debt for a stacked deck bet, i.e., medical school, might be a true good debt. The problem is that with today's benign view of mortgages and student loans, there's a general sense that any degree is a good investment (which is no longer true) and for a time it was believed that a loan on any propery was a good investment. Both can be good debts under the right (very limited) circumstances, but the reality is that too many people are getting over their heads even with good debt. We moved into a time when excess debt became the "conventional wisdom" and that's dangerous state to be in, individually or collectively, as we're now seeing. .-= Kevin@OutOfYourRut´s last blog ..<a href="http://outofyourrut.com/blog/2010/03/19/outofyourrut-friday-but-almost-saturday-personal-finance-round-up/" rel="nofollow">OutOfYourRut Friday (but almost Saturday) Personal Finance Round Up</a> =-. Financial Uproar – I agree with your reasoning. Incurring debt for a stacked deck bet, i.e., medical school, might be a true good debt. The problem is that with today’s benign view of mortgages and student loans, there’s a general sense that any degree is a good investment (which is no longer true) and for a time it was believed that a loan on any propery was a good investment.

Both can be good debts under the right (very limited) circumstances, but the reality is that too many people are getting over their heads even with good debt.
We moved into a time when excess debt became the “conventional wisdom” and that’s dangerous state to be in, individually or collectively, as we’re now seeing.
.-= Kevin@OutOfYourRut´s last blog ..OutOfYourRut Friday (but almost Saturday) Personal Finance Round Up =-.

]]> By: Financial Uproarhttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-11030 Financial Uproar Fri, 19 Mar 2010 22:05:17 +0000 http://www.fiscalgeek.com/?p=2055#comment-11030 I'm a little late to the discussion, but here's my thoughts. Mortgages and student loans can be both good and bad debt. If you go to university for a useless degree, that student loan is hardly good debt. It's the same thing when you take out a mortgage that you'd be better off never touching. In that situation, the borrower would be better off without the debt. Yet if someone turns their political science degree into law school, is that not good debt? 50k in law school debt could easily double this person's income. Say at 5% interest, it costs someone $2500 per year to make $50k more. You'd be crazy not to do it. Same thing with mortgages. Say I buy a house that over 30 years will double in value and that I pay the same amount in a mortgage that I would pay for rent. In 30 years, I'll own a house that will be worth double what I paid for it, plus I get the privilege of living without a payment after it's paid for. Generally (present situation excluded for you Americans) housing is a good investment. Either way, I waste money. (on rent or interest) That is also good debt. Big Spender's comment nails it as well. .-= Financial Uproar´s last blog ..<a href="http://financialuproar.wordpress.com/2010/03/19/youre-a-sucker-to-cut-up-your-credit-cards/" rel="nofollow">You're A Sucker To"¦ Cut Up Your Credit Cards</a> =-. I’m a little late to the discussion, but here’s my thoughts.

Mortgages and student loans can be both good and bad debt. If you go to university for a useless degree, that student loan is hardly good debt. It’s the same thing when you take out a mortgage that you’d be better off never touching. In that situation, the borrower would be better off without the debt.

Yet if someone turns their political science degree into law school, is that not good debt? 50k in law school debt could easily double this person’s income. Say at 5% interest, it costs someone $2500 per year to make $50k more. You’d be crazy not to do it.

Same thing with mortgages. Say I buy a house that over 30 years will double in value and that I pay the same amount in a mortgage that I would pay for rent. In 30 years, I’ll own a house that will be worth double what I paid for it, plus I get the privilege of living without a payment after it’s paid for. Generally (present situation excluded for you Americans) housing is a good investment. Either way, I waste money. (on rent or interest) That is also good debt.

Big Spender’s comment nails it as well.
.-= Financial Uproar´s last blog ..You’re A Sucker To”¦ Cut Up Your Credit Cards =-.

]]> By: Comparing a 30 year mortgage to a 15 year mortgagehttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10902 Comparing a 30 year mortgage to a 15 year mortgage Thu, 18 Mar 2010 05:45:31 +0000 http://www.fiscalgeek.com/?p=2055#comment-10902 [...] week on Fiscal Geek we asked the question, Is There Such a Thing as "Good Debt?" and advanced the idea that debt is debt, and none of it is [...]

[...] week on Fiscal Geek we asked the question, Is There Such a Thing as “Good Debt?” and advanced the idea that debt is debt, and none of it is [...]

]]> By: paulhttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10540 paul Sun, 14 Mar 2010 20:15:44 +0000 http://www.fiscalgeek.com/?p=2055#comment-10540 What a fantastic discussion going on around here, look at you Kevin getting the people fired up. I love it and thanks all for giving your points of view this is what FiscalGeek is all about! What a fantastic discussion going on around here, look at you Kevin getting the people fired up. I love it and thanks all for giving your points of view this is what FiscalGeek is all about!

]]> By: A Spring Ahead Roundup » JoeTaxpayerhttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10520 A Spring Ahead Roundup » JoeTaxpayer Sun, 14 Mar 2010 13:05:59 +0000 http://www.fiscalgeek.com/?p=2055#comment-10520 [...] recurring question, Is There Such a Thing as “Good Debt,” was asked at Fiscal Geek. In theory, debt is good if you can get a higher return than the [...]

[...] recurring question, Is There Such a Thing as “Good Debt,” was asked at Fiscal Geek. In theory, debt is good if you can get a higher return than the [...]

]]> By: Kevin@OutOfYourRuthttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10461 Kevin@OutOfYourRut Sat, 13 Mar 2010 22:45:21 +0000 http://www.fiscalgeek.com/?p=2055#comment-10461 Big Spender, you're completely right about big companies and their ability to leverage money by borrowing low, and investing high. But the achilles heal from an individual perspective is that it takes enormous amounts of money to do that profitably and consistently. Also, for many large companies, that's their business, so they're also prepared to take the hit if things go against them. Ordinary people don't have the ability to borrow at 3% and lend at 8%. Rainy Day Saver - Good analogy, but you have to factor in that debt is a given, a fixed cost that will need to be paid back even if the promised benefits don't occur. By contrast, the promised benefits are projections, not guarantees. Should we be accepting guaranteed debt in exchange for projected financial benefits? The Rat - Well put! .-= Kevin@OutOfYourRut´s last blog ..<a href="http://outofyourrut.com/blog/2010/03/11/since-when-are-you-the-quitting-type/" rel="nofollow">Since when are you the quitting type?</a> =-. Big Spender, you’re completely right about big companies and their ability to leverage money by borrowing low, and investing high. But the achilles heal from an individual perspective is that it takes enormous amounts of money to do that profitably and consistently. Also, for many large companies, that’s their business, so they’re also prepared to take the hit if things go against them. Ordinary people don’t have the ability to borrow at 3% and lend at 8%.

Rainy Day Saver – Good analogy, but you have to factor in that debt is a given, a fixed cost that will need to be paid back even if the promised benefits don’t occur. By contrast, the promised benefits are projections, not guarantees. Should we be accepting guaranteed debt in exchange for projected financial benefits?

The Rat – Well put!
.-= Kevin@OutOfYourRut´s last blog ..Since when are you the quitting type? =-.

]]> By: The Rathttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10449 The Rat Sat, 13 Mar 2010 20:38:31 +0000 http://www.fiscalgeek.com/?p=2055#comment-10449 In my view, debt is debt, and there's no way to 'tippy toe' around it. However, I think mortgages and education are considered to be more 'worthy' investments as they are considered long-term investments in comparison to say, a vehicle so I think there is reason to differentiate them. .-= The Rat´s last blog ..<a href="http://www.endingtheratrace.com/2010/03/setting-up-an-online-discount-brokerage-account-investing-on-your-own/" rel="nofollow">Setting Up An Online Discount Brokerage Account & Investing On Your Own</a> =-. In my view, debt is debt, and there’s no way to ‘tippy toe’ around it. However, I think mortgages and education are considered to be more ‘worthy’ investments as they are considered long-term investments in comparison to say, a vehicle so I think there is reason to differentiate them.
.-= The Rat´s last blog ..Setting Up An Online Discount Brokerage Account & Investing On Your Own =-.

]]> By: RainyDaySaverhttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10448 RainyDaySaver Sat, 13 Mar 2010 19:29:19 +0000 http://www.fiscalgeek.com/?p=2055#comment-10448 To me, good debt is something that will result in an (evenutal) financial gain -- mortgages and education fall under these categories. You'll always have your education, which tends to increase your income, and if you hold onto your home after buying it, it will eventually appreciate in price (in theory!). Bad debt is credit cards and car loans, particularly because a vehicle depreciates the minute you drive it off the lot! .-= RainyDaySaver´s last blog ..<a href="http://feedproxy.google.com/~r/Rainy-daySaver/~3/EFVI1riCQCA/dont-beat-yourself-up-over-spending.html" rel="nofollow">Don't Beat Yourself Up Over Spending</a> =-. To me, good debt is something that will result in an (evenutal) financial gain — mortgages and education fall under these categories. You’ll always have your education, which tends to increase your income, and if you hold onto your home after buying it, it will eventually appreciate in price (in theory!). Bad debt is credit cards and car loans, particularly because a vehicle depreciates the minute you drive it off the lot!
.-= RainyDaySaver´s last blog ..Don’t Beat Yourself Up Over Spending =-.

]]> By: myfinancialobjectiveshttp://www.fiscalgeek.com/2010/03/is-there-such-a-thing-as-%e2%80%9cgood-debt%e2%80%9d/#comment-10440 myfinancialobjectives Sat, 13 Mar 2010 14:58:15 +0000 http://www.fiscalgeek.com/?p=2055#comment-10440 Interesting point Kevin! So are you implying that while I was in school my student loans were "good debt", but since I am not in school anymore, it's just debt? I would have to say that I will for the rest of my life be using the item that my debt purchased, my education. I am not in undergraduate school right now, but due to it I have my job and my income, therefore I am technically still "using" the item that my debt purchased? .-= myfinancialobjectives´s last blog ..<a href="http://myfinancialobjectives.com/?p=224" rel="nofollow">The Ultimate Motivator: Compounding Interest</a> =-. Interesting point Kevin! So are you implying that while I was in school my student loans were “good debt”, but since I am not in school anymore, it’s just debt?

I would have to say that I will for the rest of my life be using the item that my debt purchased, my education. I am not in undergraduate school right now, but due to it I have my job and my income, therefore I am technically still “using” the item that my debt purchased?
.-= myfinancialobjectives´s last blog ..The Ultimate Motivator: Compounding Interest =-.

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