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Iff · 07-14-2007, 03:43 AM

I can say two things about this subject. First of all, any debt is good debt if you can invest the same amount with a return of loan interest + inflation + reasonable return of investment. So, if you have an investment opportunity in sight that can give you a return of 40% per year, by all means, max out your 18% interest credit card, because you would still end up with a 17%-18% profit. Of course, this example assumes that the magical investment is with a low or moderate risk factor.
On the other hand, sweet deals like the former rarely appear and therefore it's rather safe to say that you should probably avoid all debt as much as possible. Mortgage can be an exception, because an apartment / a house is often a thing that we you can't live without (you have to have a roof over your head) yet rather expensive, so you just might not have the cash for it right now, especially when your still young. So it might become sort of a necessity (yes, you could rent, but it might be more useful to pay the mortgage payments than rent - if the market is favourable, you can pay the same amount every month but end up with your own piece of real estate in a decade or two).

When viewed from another angle... I am familiar with the teachings of both Dave Ramsey and Robert Kiyosaki. I don't want to undermine anyone here, but having read some of the real life examples of people following Ramsey's method, it seems that it is meant for the more average people. For somebody less experienced the difference of good and bad debt can be confusing, so it is easier for them to take it from the all-debt-is-bad point of view and be a lot better off with their lives. Sort of a mainstream method.
Kiyosaki, on the other hand seems to make the individual think more for him- or herself. More emphasis is put on running a business and making profit on other people's work. So, if you're smart enough to exploit other (yes, I don't mean exploit, but work in a team so everyone profits, but I am just getting my point forward), you can be let to decide on your own if the debt you have / could have is worth it or not.

If anyone wonders, I currently have a negative net worth of about $15000 (you know, college kid

), but I am on my way to eliminating it and therefore rather knowledgeable... at least in theory.

07-14-2007, 03:43 AM	#13 (permalink)
Iff Member Join Date: Apr 2007 Posts: 64	I can say two things about this subject. First of all, any debt is good debt if you can invest the same amount with a return of loan interest + inflation + reasonable return of investment. So, if you have an investment opportunity in sight that can give you a return of 40% per year, by all means, max out your 18% interest credit card, because you would still end up with a 17%-18% profit. Of course, this example assumes that the magical investment is with a low or moderate risk factor. On the other hand, sweet deals like the former rarely appear and therefore it's rather safe to say that you should probably avoid all debt as much as possible. Mortgage can be an exception, because an apartment / a house is often a thing that we you can't live without (you have to have a roof over your head) yet rather expensive, so you just might not have the cash for it right now, especially when your still young. So it might become sort of a necessity (yes, you could rent, but it might be more useful to pay the mortgage payments than rent - if the market is favourable, you can pay the same amount every month but end up with your own piece of real estate in a decade or two). When viewed from another angle... I am familiar with the teachings of both Dave Ramsey and Robert Kiyosaki. I don't want to undermine anyone here, but having read some of the real life examples of people following Ramsey's method, it seems that it is meant for the more average people. For somebody less experienced the difference of good and bad debt can be confusing, so it is easier for them to take it from the all-debt-is-bad point of view and be a lot better off with their lives. Sort of a mainstream method. Kiyosaki, on the other hand seems to make the individual think more for him- or herself. More emphasis is put on running a business and making profit on other people's work. So, if you're smart enough to exploit other (yes, I don't mean exploit, but work in a team so everyone profits, but I am just getting my point forward), you can be let to decide on your own if the debt you have / could have is worth it or not. If anyone wonders, I currently have a negative net worth of about $15000 (you know, college kid ), but I am on my way to eliminating it and therefore rather knowledgeable... at least in theory. Last edited by Iff; 07-14-2007 at 03:45 AM.