Is debt good? Is debt bad?
Someone says that if debt is like getting into a pit; and if you find yourself in a pit, first, stop digging! The Bible says that the borrower is servant to the lender. And time again, we see people who take a small loan, drown in it and lose a lot.
So is debt good or bad?
I think it’s more about why you got into debt in the first place. I think borrowing always comes with pain, but we need not regret the pains of growing if the pains are indeed for the purpose of growing.
Summarily, good debt is debt incurred for the purpose of acquiring assets. They are great if the asset can pay back the loan without putting you, the debtor, under financial pressure. Bad debt is debt incurred to acquire “liabilities.” Here liabilities mean anything that will not put money in your pocket eg personal cars, status symbols, etc.
And some people have put themselves in the bad situation of owing in different “buckets.” One is bad enough.
If you find that you are losing control of your indebtedness, then you need to take action to redeem yourself. What can you do? George Clason in The Richest Man in Babylon teaches some steps to bring “run away” debt under control:
First, make a list of your creditors
Second, make a plan to repay them within 20% of your income. In some cases, there’s a rigid plan to pay back which may be above the 20% mark.
Third, notify your creditors of your plan
Fourth, begin implementation of the plan and stick to it.
In contemporary times, you also hear about the snowball effect. When you roll snow into a ball and you throw it downhill, the farther it goes, the bigger it gets because it picks up more snow. As you pay your debts, the smaller ones will begin to get paid up and then you have more money to pay faster on the bigger debts.
🥂 to keeping debts under control.
Image by Mimzy from Pixabay