Weekly Tip July 03: Good Debt: Investments And Purchases That Pay Off In The End

<span>Weekly Tip July 03:</span> Good Debt: Investments And Purchases That Pay Off In The End
  • Opening Intro -

    Some financial gurus argue that there is no such thing as good debt.

    While having no debt is better than having debt, there are somedebts that can wind up paying off in the long term.

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Credit card debt would not really qualify as good debt, as it generally has high interest rates associated with it. However, there are some debts that can work out well over time. Here are three debts that can pay off quite handsomely.

  • Home Mortgages

    There are instances in which mortgages can be bad debt. The financial crisis of 2007-2009 bears this out. Most of the problem hit those who were in overheated markets that were driven up by little but speculation. Traditionally, however, home prices have tended upward over time. Families have to live somewhere, and it’s better to build equity with your living expenses than it is to give every penny to a landlord.

    Fixed rate mortgages stay at the same price over time, whereas rents tend to go up a few percent on an annualized basis. This can make borrowing for a home beneficial from the perspective of building wealth over time and improving cash flow because of the lack of increased rent costs.

  • Education

    Higher education is an expensive proposal for most people. The cost of an education can be in the tens of thousands on an annualized basis. Regardless of the cost, there are studies that indicate that those with a four-year degree will wind up earning much more than those without any college over the course of their careers.

    For example, getting an analytics master’s degree online can help you qualify for some of the most financially-rewarding jobs. This is definitely a debt that can pay off over a period of years. It’s also a debt that’s better to take out sooner than later so that there is a longer period of time to make a higher salary.

  • Business Loans

    Few people have hundreds of thousands sitting around in a bank that they can put toward a new business. Even some of the cheaper franchises with lower startup costs can come in around $10,000. This is where a small business loan can come in handy. A loan can provide the capital that those with a great idea need to buy some time to operate and start to turn a profit. While those who are unsuccessful will be stuck with debts that they might have trouble paying, those who hit on a great market can see their loan turn out to be a great investment.

Few people look at loans as an investment vehicle, but borrowing for a home, an education or a business opportunity can have long-term financial benefits for those who are smart with their money.

Money Management reference:

about debt management

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