Thread: Debt or No Debt?

Robert Kiyosaki suggested that it is ok to have debts as long as it is good debt and not bad debt.

Dan Kennedy, however, believes in getting and staying debt free for practical purposes. He mentioned about the psychology of attracting wealth by feeling wealthy at your core (not indebted) and by feeling and being independent.

What do you believe? Any thoughts on this?

Originally Posted by Rickson9

Depends on your personailty. There is no right answer. There are a lot of wealthy individuals who swear by leverage and vice versa. Speaking for myself, I don't use leverage.

The low stress approach is debt free. If you use leverage and things go south, you can wind up broke very quickly. I've read where billionaires went broke when highly leveraged. I think its a delicate balance. I think you should incur debt only where you can make a ROI. The average broke person, spends money on things that depreciate and things that don't have a ROI. For most people debt kills and enslaves.

In order to create leverage in your business, you will need money from an outside source - likely 'good debt' or funding. Not every business needs leverage or additional capital though, it all depends on your business and how fast you want to grow. For me, running a B&M business, 'good debt' is great because it allows me to grow quicker than if I had to wait to reinvest money. This is true in many businesses.

America is on an anti-debt rampage, but debt itself is not bad - what many people use debt for is. I got a $65k SBA loan to start my business, and if I had not gotten it I would have had to give up a large portion of my business to an investor in order to get started. By getting the loan, I increase my monthly costs, but I own 100% of the business.

Originally Posted by Dos

Robert Kiyosaki suggested that it is ok to have debts as long as it is good debt and not bad debt.

Funny, and every person I know that followed the RK real estate philosophy is no better today than when they started. In fact, most of them are worse off, some bankrupt. I guess the problem with "good debt" is that it can suddenly turn into "bad debt"

For those who are unsure to the question I implore you to try this test: Be entirely debt free and report back on how it feels... then DECIDE.

I've heard a lot of business owners talk about leveraging good debt, but I can't fathom going into debt. It will take a long time and a lot of convincing for me to come around to the idea of going into debt for a long-term benefit.

Originally Posted by Trevor Kuntz

I've heard a lot of business owners talk about leveraging good debt, but I can't fathom going into debt. It will take a long time and a lot of convincing for me to come around to the idea of going into debt for a long-term benefit.

Imagine you own a business, and you are just barely profitable, but you have the opportunity to get 1,000 new customers which is worth $250,000 in gross profit to you based on average customer lifetime value. This opportunity will cost you $20,000, which you don't have in cash and will take quite a while to save up because you are barely profitable. Do you wait a year until you save up the money, or do you take on debt to do it NOW? I would take on this $20,000 in Debt every single time...

I also believe it's a matter of personal preference. I hate having debt unless I know I can pay it off in full without any hesitation or thought.