Debt Free?

I was reading a book recently that said, “Debt free? Are you kidding me? Have you seen our national deficit?” That woke me up a little bit. Being debt free is a concept few people around the world understand. When you take into account national debts even fewer understand that being out of debt personally doesn’t mean you aren’t in debt publicly as an individual. Just look at our national debt clock.


In conjunction with debt free shenanigans, Robert Kiyosaki, Rich Dad Poor Dad best selling author, said being debt free, i.e. go to school, get a degree, work hard at a job, save your money, live conservatively, is boring, dream crushing, and wrong. Instead people should focus on how they can make their dreams come true. Again this touches on the Why and not the how, but if people could figure out Why they should have investments, in all their forms, that generate passive income for them and then they wouldn’t need to live within their means.

That brings me to good debt and bad debt.

What is bad debt? Bad debt is a liability. What is a liability? It is something that adds to your expenses and takes money out of your pocket. It can range from a car, which is also a depreciating ‘asset’, or the more common credit card. Credit cards are especially bad due to their rising and adjustable interest rates, which are already impossibly high.

What is good debt? It is an asset. What is an asset? It is something that adds to your income and adds money to your pocket each month. It can range from dividend paying stocks and bonds to rental properties to businesses that pay you in the form of dividends. Robert Kiyosaki and his wife are independently wealthy. They’ve got over, no joke, 3,000 rental units. Yet they do not know their net worth. Why not? Who cares is why. They are tens of millions of dollars in debt…good debt. Their debt services its own payments AND generates positive monthly cash flow and so who cares what the total net worth is for that couple or any couple for that matter. Answer: nobody should care.

Hopefully people wake up and realize good and bad debt when they see it and take advantage of the good and shun the bad when they can.