Comments on: Why Good Debt is a Truth

By: Squawkfox

Squawkfox — Sun, 05 Jul 2009 17:26:21 +0000

Mr. Cheap! You are without a doubt insane! Albeit, I fully appreciate you taking to your blog and challenging my notions of debt. Finally, someone grew a pair and launched a civilized rebuttal on my reasoning.

Now, if you want a signed copy of ANY of my photos all you have to do is ask. I’m aware the shot of my red bra nestled on a fine set of grapefruits is very popular. But I must warn you, camera angles play a big part in the bosomy appearance. I suppose like most things in life (including debt) perception and presentation are key to one’s outlook.

By: sois mike

sois mike — Tue, 30 Jun 2009 00:24:28 +0000

Once you get past the personal ability to handle risk and stress, the real debate is about the term “good debt”. In every case mentioned, there is a good outcome and a bad outcome and the bad outcome is always made worse by debt.
Yes, some can handle debt, and yes debt can prove very usefull. I can wrap my mind around usefull debt….but my goal at all times would be to get rid of the debt as fast as possible. Who dreams of getting rid of something good?
On the scale of benefits; debt that promotes a worthy goal is positive ( a loan to buy the car to get to the new job), but what would be better is to have the car and the job without the loan. Ergo, having the job is “good”, having the loan is necessary.

By: The Financial Blogger » Blog Archive » Financial Ramblings

The Financial Blogger » Blog Archive » Financial Ramblings — Sat, 27 Jun 2009 11:25:06 +0000

[...] Pillars tells that good debt is truth. (all debts are good even the one to buy a plasma TV !… just [...]

By: This and That: Best of the Blogs Edition | Canadian Capitalist

This and That: Best of the Blogs Edition | Canadian Capitalist — Fri, 26 Jun 2009 12:06:24 +0000

[...] Mr. Cheap rebuts Squawkfox’s contention that good debt is a lie. [...]

By: MLR

MLR — Fri, 26 Jun 2009 07:03:34 +0000

I enjoyed this post as I have gotten into this same discussion multiple times.

Usually revolving around the business debt, though. People just don’t get debt financing.

By: Thicken My Wallet

Thicken My Wallet — Tue, 23 Jun 2009 16:58:30 +0000

I agree with CC. Debt has no meaning but the one you give to it.

Thanks for the link.

By: Mrs Pillars

Mrs Pillars — Tue, 23 Jun 2009 15:53:58 +0000

The company I used to work for required a university degree for even entry level positions. So a customer service rep there would need some kind of degree to get a job. For them, the student loan would be worth it, even if it takes longer to pay off than it would for say, a lawyer.

By: Canadian Capitalist

Canadian Capitalist — Tue, 23 Jun 2009 14:48:57 +0000

Debt is simply a tool. If used wisely and responsibly, it can be very useful. But, if it isn’t used carefully, it can land someone in a world of financial hurt. A gun can be used to gather food but can have deadly consequences in the hands of someone who is careless.

By: Four Pillars

Four Pillars — Tue, 23 Jun 2009 12:50:28 +0000

Very good analysis – I think the bottom line is that there are no solid rules for everyone. What might be “good” debt for me might be “so-so” debt for you.

One other point which isn’t really related to the main point of your post is that if you are borrowing to invest in a liquid investment (namely stocks) then I don’t think it’s accurate to consider the entire loan as one unit. I think it has to be broken down into two parts
1) The amount covered by the investments
2) The amount not covered by the investments (if you are underwater).

In my mind if you borrowed $10k and the stocks are worth $7k then $7k of the loan is covered and $3k is not. I would argue that the $7k portion of the loan is “better” than the $3k portion.

Of course stock prices can drop in the blink of an eye so this might not be that meaningful.

By: Rob Bennett

Rob Bennett — Tue, 23 Jun 2009 12:39:25 +0000

I certainly agree that there are circumstances in which debt is good.

I also think it is fair to say that for every middle-class worker who carries too little debt today there are ten who carry too much.

In theory you are right. In practice Squawkfox is more right than wrong.

But theory matters. It is important for people to understand that debt can be a good thing and to know when to take advantages of the opportunities it present.

Rob