I used the same word for very different things
Car finance, a laptop bought on credit, a holiday and a mortgage all arrive under the same word: debt. They do not create the same outcome. Treating them as identical hides the question that actually matters.
Some debt pulls the future toward today
Consumer debt can make tomorrow's income pay for yesterday's spending. The purchase is already gone while the monthly payment remains. That can narrow the gap between income and spending for years.
Some debt can finance an asset
The episode contrasts those purchases with a mortgage at a very low interest rate used for a rental property. In that case the debt was attached to an asset that could produce income and potentially appreciate. The important point is not that property debt is automatically good. It is that the economic purpose of the borrowing matters.
Ask what the debt is doing
When I look at debt now, I ask a few simple questions. What did the money buy? Does the thing still have value? Does it produce income or reduce a future cost? What does the repayment prevent me from doing elsewhere? Those questions tell me more than the word debt does.
The goal is not to hate debt
The goal is to avoid letting yesterday consume tomorrow. Debt can be a tool, but tools need a purpose. Financial freedom becomes harder when borrowing repeatedly turns future income into payments for things that are already gone.
The goal is to avoid letting yesterday consume tomorrow. Debt can be a tool, but tools need a purpose. Financial freedom becomes harder when borrowing repeatedly turns future income into payments for things that are already gone.
This essay is the deeper story behind NobodyToldMike Episode 10.
Watch the episode →Educational content only. This essay is not financial advice. Financial decisions depend on your circumstances, goals and risk tolerance.