How is Debt good?

Kia Ora,

It is one of the things that people find hard to grasp as they are always taught that debt is bad. Much of it is & we go into debt to own our own house or a car or just because we can. But none of those are assets you are buying.

When it is good debt it buys you assets that returns you a positive cash flow return after all associated costs have being covered.

So you buy a house for example with a $5000 deposit you get a loan of $45,000 & the income from the property brings in $150 positive cash flow. Not a great amount but it adds to your, or your entity that owns it, cash flow. Keep a few of these & at some stage you will be in a position to sell & reinvest for greater cash flow or the cash flow from the investments will be greater than your expenses.

True at present getting the loan might be an issue, but at some stage the financial institutions have to lend.

If they don't the economy will collpase.

The whole montary system is set up so that there has to be new currency being pumped into it & that comes through loans.

This is part of the reason why President Obama has ordered US banks to start lending to small businesses.

It takes a change of mindset but if you can put yourself through that then it will be worth it.