There is a general sense, especially among the chattering classes, that debt is a four letter word. Many people see debt as a stop off on the road to poverty and so will intervene whenever they see somebody going into debt. Many people have a bad opinion on debt is because of the fact that some people take on too much debt and can’t service it.
But using credit wisely can lead to all sorts of positive outcomes in the future. For instance, many of the most successful people in America went into debt in order to build their businesses. For example, Elon Musk has made a fortune in the automotive and space industries by taking out more than a billion dollars in debt. Here are some ways to use debt that are beneficial.
Make Money With Your Debt
You don’t have to be a billionaire to make money using debt. Anybody can do it, especially if you have already invested significantly in property.
It’s worth noting that the majority of people don’t save their way to retirement. Instead, they use money from the bank to buy properties and build out their own property portfolio. The amount you can borrow from the bank will be determined by how many assets you have, as well as your age and career prospects.
Get A College Degree
Another reason to go into debt is to get a college degree. Statistics show that college graduates earn more than similar workers who only have a high school education. According to the US Census Bureau, those who go to college can make nearly double over the course of their lifetimes than those who just go to high school. Sure, taking out a student loan can seem daunting, especially since you have to pay it back and you can never take bankruptcy, but degrees usually back the original amount borrowed, and then some.
It should be noted that different degrees have different payoffs. Degrees in the liberal arts don’t command as high a wage as degrees in the sciences. Remember, the rarer the skills that you have, the more valuable that they are. People with rare skills, like the ability to handle big data or analyze engineering projects, are going to be the ones who are most in-demand. This means that they are going to get paid more in the future.
Before going to college, it is also worth thinking about which degrees will be the most relevant for the future. Going into debt for an accountancy degree right now might not be such a good idea because accountants may soon be replaced by smart software. A better field to go into might be health care since jobs in this sector are unlikely to be automated in the near future by advanced robots and sophisticated artificial intelligence.
Buy A Home
Another reason for going into debts is purchase a home. On the face of it, houses don’t seem like an investment. That is because homes don’t actually create anything like, say, a factory does. But it should be remembered that because of the way that the government manipulates the financial system, the prices of homes will continually go up. This means that they can be an excellent way to preserve your wealth since they don’t tend to depreciate.
Once you have paid a significant amount of money towards your mortgage, you will build up equity in your home which can then be turned into an asset in the future. It is easier to get bad credit loans when you have already paid a significant amount of money into your home.
Start A Business
A final way to make good use of debt is to invest in business. Steve Jobs started Apple computers with less than $100. But he used that money and reinvested it in his business so that he could buy more computer components to sell to local computer stores. After a while selling computer parts and reinvesting the proceeds into his business it soon grew into a multi-million dollar operation. After about 30 years of this process, Apple computers is estimated to be worth around half a trillion dollars according to the most recent market estimates.
What the experience of Apple shows in that it can be extremely lucrative to go into debt, so long as you have a great idea. It is also worth mentioning, however, that good debt can go bad. Never take out more debt than you need and only take out enough to cover your expenses.