“Rich Dad Poor Dad” was a smash self-help hit book a few years back, selling more than 32 million copies. One of its major premises is that the odds for accelerating wealth creation are shortened for children of “rich dads” who grow up learning the difference between those who “go to work to make money” and those who “make money work for them.”
As yet, there is no best-selling non-fiction book titled “Good Debt Bad Debt”—but that phrase could make a fitting companion to Robert Kiyosaki’s hit. The concept behind it would be simple enough—but a distinction that’s increasingly valuable as worries proliferate about continuing inflation and possible recession.
It’s a distinction that can be lost in the clamor. For instance, CBSnews.com declared last week, “Any debt you can get rid of now will help put you in a better position if leaner times lie ahead.” That’s mostly true, but misses the basis by which a debt can be judged ‘good’ or ‘bad.’ The key question is, “does it help generate income or build net worth?”
Bankrate.com has long posted a simple chart tucked away beneath all the ads:
Good debt vs. Bad debt
Mortgage Credit card
School loan Store credit card
Real estate loan Auto loan
That’s a clear enough list, but when explaining it to the kids, the Good Dad (or Mom)’s lesson would be most memorable if it were accompanied by a simple explanation of why:
Good debt helps increase wealth.
Bad debt only postpones payment.
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