Debt isn’t all bad

I’ve spent a large percentage of my working life avoiding debt. It’s the main reason I haven’t gone back to school, and primarily why I wish I’d gone to a cheaper one the first time. It’s also why I don’t own a credit card, drive a (relatively) cheap car, shop at thrift stores, and haven’t bought a new phone in years.

It’s easy to adopt the mindset that all debt is bad. Just as it’s easy to get hung up on the initial cost of anything without thinking through the potential return.

While it is true that borrowing money you can’t hope to pay back is certainly something to stay clear of, using borrowed money to finance something you otherwise couldn’t is not necessarily something to avoid.

If what you put your money into adheres to a multiplier effect—one where for every dollar you put in, you get one or more dollars out—it can be logically thought of as a ‘good investment.’ The only contingency being if you can pay it back.

This means that, if you can make a credible prediction that you can pay back what you borrow, with interest (which is exactly what a bank does when guaranteeing a loan) it’s okay to borrow it. And if it’s okay to borrow it and it’s a good investment, not only can you do it, but you probably should. Because doing so will contribute to a better fiscal future.

Not everything is a good investment, and it’s always wise to consider the opportunity costs of any choice you make. But knowing that debt is an option—that it’s not only okay, but in many cases necessary—can give you the freedom to incur it when you have to.