Other Debt
Not all debt is bad debt.
In his best selling book “Rich Dad Poor Dad”, author Robert Kiyosaki offered a new twist on the definition of assets and liabilities. He defined an asset as something that puts money into your pocket and liability as something that takes money out of your pocket.
If you have an investment property and you are receiving rents that can be used against the mortgage, then this type of debt is considered a good debt because it adds to your overall wealth value. However, credit card debt, car loans and even your home mortgage, do not create money that comes into your pocket. These debts can cause scarcity of money in time, in your life.
He goes on to talk about a mortgage on a home as a debt that leaves the person with less freedom and less independence. He illustrated the trap of personal debt and the scarcity it creates in people’s lives. Even though you can make more and more money in a business or working elsewhere, when you have personal debt, these liabilities take money out of your pocket and leave you with no freedom and little independence.
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