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Good vs. bad debt
Krediteab 9 J.
Not all debt is equal: good debt finances things that gain value (property, education). Bad debt finances consumption that loses value.
The most important distinction when it comes to debt: investment debt vs. consumer debt.
Good debt:
✅ Mortgage (the house rises in value, you save rent)
✅ Student loan (education increases your income in the long run)
✅ Start-up loan (the business can generate profits)
Bad debt:
❌ Smartphone on instalments (immediately loses 50% of its value)
❌ Holiday loan (the experience has no resale value)
❌ Overdraft (extremely expensive interest for everyday consumption)
Rule of thumb: if you can't afford something in cash and it doesn't create lasting value – don't do it.
Did you know? Warren Buffett has billions in debt – but only “good” debt: he borrows at 3%, invests at 10% and keeps the difference. An overdraft at 12% for a holiday is the opposite.
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