Is There Really Such a Thing as “Good Debt”?

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Alright, alright, alright. Money is on my mind indeed. Yes, everybody. It's your boy Darren Harvey, and I am the money counselor, and I am your greatest host of financial state of minds. And this is a show where we help you get to that bag, manage that bag, and grow that bag as best as possible as we discuss financial and business literacy and anything, everything to do with the almighty power of the dollar. Now, on today's episode, I want you to join me as I ponder my opinion as I think here. I want you to think about it too. This question. Is there really such a concept of good debt? Let's be real. Is there really such a concept as good debt? Now, everybody in the financial world is taught that there is a concept of good debt and there's a concept of bad debt. All of us, wealth managers, financial advisors, financial planners, financial coaches like myself. We all learn this concept. If you watch any type of content on social media on YouTube, you have definitely heard of good debt and bad debt. Matter of fact, shameless plug, check out episode 89 where I talk about this myself with co-host Maurice Shabazz, Good Debt versus Bad Dad. But that's what I'm taught. I want to give you guys my personal opinion and my viewpoint on the concept of good debt. Is there really such a thing? Now, yes, I'm here to acknowledge that, of course, there is debt. Most of us, if not all of us, at one point in our lives have experienced being in debt. First question I want you guys to think about as I talk. Has it ever felt good to be in debt? Regardless of what it's for, regardless if it's for your student loan when you first took it out when you were 18, your car loan when you took that out around that same time, whether it was an education-based loan that may be outside of credentialing college, whether it was buying your first home, whether it was buying your Jordans, you guys knew I was gonna say that. Did I ever feel good? Did it really? Let's just be honest with each other. Did that ever really feel good? Now, I'm not gonna subscribe to say that debt is always bad. That's not what I'm saying. I want to make that very clear. But I want us to continue to think, when have we ever felt good when we were in debt? I don't know anybody of any wealth class to go, oh yeah, I've been $5 million of debt, but even though I'm worth $500 million, and I feel great about that. Oh yeah, man, I feel great. Yeah, just great. I want more debt. You know what? Just rack up $50 million more in debt. Let's just do it just cuz. No one has those conversations. Let's just be real. No one has those conversations. Debt itself, like money, is a tool. You can use money or borrowed money that you haven't paid back, which is the very definition of debt, to do something for you. And of course, depending on what that use is, can determine if it's something that is a better use or not so better use. So, yes, I will always continue to encourage people. Yeah, if you don't have any money and you are trying to better yourself or you're trying to develop a skill, I'm not gonna be mad at you for taking out a student loan. And of course, the opposite is true. If you're in 20K in debt and you just went and door-dashed a thousand dollars this month, then yeah, I'm gonna look at you a little crazy, of course. I think we all can agree upon that. Now, let's ask this silly question. If everybody who is listening to this right now had $50 million, would any one of us choose to be in debt? Would any one of us choose to be debt? Now, personally, I know multimillionaires that have millions of dollars, they have a positive net worth, but they do have some debt. So I acknowledge that there is reasons to use debt even when you have the money to do so. I'm personally guilty of that. But does that ever feel really good? Again, that's the question I propose. Does that ever feel amazing? Like, oh my god, I'm gonna brag to you that I have half a million dollars in debt for a business investment for whatever. Is that really how we feel? Personally, if you want my honest answer, no, we don't feel that way. Like I said earlier, we do not feel that way. So, this is my true opinion right here. Like I said earlier, debt is a tool because debt is money you have not borrowed. Depending on how you use your tool, it's gonna dictate how effective what you're trying to do or where you're gonna go as far as your goal is gonna land or where you're gonna be at. So, yes, as a financial coach, I'm not gonna be mad at anybody who invests X amount of dollars that takes out a student loan to better themselves. Caveat there. I am not gonna be mad about somebody taking out a car loan. Caveat there. I'm not even gonna generally be mad about somebody who buys a house and has to borrow for their mortgage. Caveat there. Now, Darren, why the heck did you say caveat every single time you mention that? Well, first off, I may have used the wrong word. The point is, there's always nuance, you guys. This is why personal finance is personal, it's dependent on each individual or and their families. It's situational. Very rare is one person's situation in life gonna be identical to another person's situation. If you check out my episode, I believe it's episode 53. Is college still worth the IOI? My conclusion is that it depends on the degree you get and how much money you pull out for student loans. In layman's terms, guys, I don't think anybody should be borrowing $200,000 to get a master's degree in sociology under no circumstances, period. Financially. I don't think that makes good financial sense. I don't think it makes sense to borrow $150,000 to buy an exotic car just to run it out on services like Tural. I don't think that makes good financial or business sense. It's all circumstantial, you guys. It's not as simple as, oh, just because it's a mortgage or oh, just because it's student loan makes it a good or bad debt. There is nuance to all of this. So your goal and my goal is always the same. Don't be in debt. Just don't be in debt, period. That's the ultimate goal. The ultimate goal is to not be in debt, period. I rather have five million dollars in no debt than ten million dollars with five million dollars of debt. The net worth is the same, the stress is not. Let that sink in. The net worth is the same. The stress level is not. Somebody who has five million dollars debt-free, scot-free, doesn't owe any bank, they don't owe Chase, they don't owe Bank of America, they don't owe Wells Fargo, they don't owe any credit card issuer, they don't owe their grandma, they don't own their mom, their dad, their wife, their cousin, brother, sister, they don't own anybody money. That person is more not likely to be in less stress than the person who has $10 million and has $5 million of debt that they have to pay back. So as you're making choices in life to invest in yourself, because if you're a listener of Financial State of Minds or pretty much any financial podcast, we're all gonna say it's okay to borrow money if you don't have the money to spend yourself. I rarely advise somebody, if you have the cash, to just go borrow money. No, if you have the cash, use your cash or use a credit card, get those credit card rewards, take advantage of the net 30 and pay it off. I very rarely advise people to just go into debt when they have the cash. I 100% advise people to go into debt if it's to better themselves so they can make money, because you don't have the money to do it yourself. That's the whole nuance of it. So as you guys are out there in the real world and you're making decisions, whether you're a 17, 18-year-old, let's tune when I'm recording this. A lot of you guys are about to go into college. If you haven't taken out your car, that is gonna be your first major loan. Please check out this college worth the RLI and make the right borrowing choice for your situation. And if you need a little bit of guidance, feel free to DM me. It's the same thing for everybody. If you're trying to buy a car and you may be able to afford a $30,000 car with borrowed money, you may be able to afford the payments. That doesn't mean you should take out the loan. If it makes more sense, because you have $10,000 lying around to make a down payment to buy a $10,000 car and it's safe and reliable, dude, pay the cash for the $10,000 car or take out a $15,000 loan. If you want a little nicer car, put that $10,000 down payment and you just have a $5,000 loan. Maybe it doesn't make sense for you to buy a house even though you have the money to make the payments. The point is, I want you guys to know is that there's nuance to everything when it comes to debt. Debt really is neutral on its own. The decisions you use with that money that led you to the debt is good or bad. That's a decision. And it's not as simple as a bucket as again, oh, it's a student loan, good debt, car loan for your good debt. Oh, you you're investing yourself in a business, good debt automatically, just automatically, just you know, just automatically it's good. No, you guys. Please reach out to me if you have if you need more clarity about this, or get some coaching, get somebody you trust. But choice is the reason why we're in debt. We all choose to be in debt. Now, of course, circumstances may put us in a situation where the other choices, well, homelessness, not making more money, not being able to take care of our families, our kids. I get it. I'm not trying to say these choices are fair or easy, but debt in itself is a choice. Unless you're scammed, unless it's flagrant, you always choose to be in debt or not. So be intentional about what you choose to be in debt for. As I've shared many times, I have had at one point about $140,000 in credit card debt. A lot of that was investment, a lot of that was dumb stuff. No problem admitting it. I'm debt-free now. I've been debt-free for a couple years now. I made the right choices to where I was in debt. I knew I wasn't going to be in debt forever. And I wasn't. I was in debt for that amount for a month, and then it went to zero because of an investment. So that made that $140,000 in debt a good investment or a good debt. But if my thing didn't work and I'm stuck paying the front, I'm gonna call it good. So again, it's about intentionality and it's about what you decide to use your money for. So think about those concepts, you guys. I'll pose the question, you guys. Again, you can have what? Let's do the same example as I said: $10 million in cash, but you're in debt $5 million, so you have a positive net worth, five million, or you can take five million dollars and be click. You don't owe anybody nothing. Which would you choose? Let me know by a DM, via comment, share this episode, of course. This is just my personal opinion, but yeah, it's not that simple. It's not just simple as the simple buckets of, oh, because it's student loans, oh, because it's mortgages, it's good debt. And the same thing too. Maybe, oh, someone's buying Jordans most of the time. I make fun of that, but there may be a business or a reason to buy Jordans that will put you in debt. You never know. It's all circumstantial and it's all personal. And that's the beauty of personal finances. It's personal to you and your situation. All right, that's it. I'm done with this episode. Hope you guys enjoyed. Hope we got you guys thinking. Mainly, I just want you guys to not just take everything you hear in the space as blanket in truth. I want you guys to understand that there's nuance. I want you to really think before you make these decisions. So again, go check out episode 53, is college worth the ROI, and go check out episode 89, good debt versus bad debt, where I really talk about those two subject matters. So when I'm coaching and sitting down with people, I'm looking at their what they've spent, what they got into debt to. And yeah, I'm generally honest, like I'm talking to you guys right now. Hey, if I see a $20,000 or $30,000, $50,000, usually I see like a $100,000 student loan. What'd you get your degree in? Oh, is it in communication? Is that really the best choice? Really the best decision? Or compared to somebody else who spent that same $100,000 and it was in engineering and they're making $150,000 entry. I'm not gonna be mad about that at all. I'll be like, yeah, that was a great use of debt. Let's figure out how we can pay that debt down as quick as possible. Same thing with the cars, same thing with the mortgages, same thing with your business investments. Those are generally the four big pillars of good debt that we hear: real estate, business, self-education, and assets are tools to help you make money like a car. So I rambled long enough. That's it, you guys. I'm out of here. Peace, kings, and queens. Continue to follow me at Financial State of Minds, pretty much all social medias. I'm on everywhere. Check out financial state of minds.org, financial state of minds.com. So, anyways, I'm wrapping it up for really peace, kings, and queens. I am out of here.