What the heck is debt anyhow?

What the heck is debt anyhow?

Time to back up and explain debt. Sure, you probably have an idea of what debt is. Most likely, you have some yourself. Car loan, mortgages, maybe even a student loan. We have it, but do we know what it is?

The best definition I have ever heard explaining debt is this: debt is using tomorrow’s dollars to buy things today. For the examples I gave above, I can argue that incurring debt to get an education (usually results in higher wages), buying a car (sometimes needed to get a job, hence earning wages), and buying a house (building equity in an appreciating asset – where you can live) can be all good ideas.

It’s ok to spend tomorrow’s dollars today for those examples because buying those things today will help you make more dollars tomorrow. It’s not ok to spend tomorrow’s dollars today if you waste those dollars because tomorrow will come eventually and you won’t have the money you need because you spent it already.

Next blog is going to talk about good debt versus bad debt. I know some folks will respond and say all debt is bad, but I can make an argument that for the right reasons, spending tomorrow’s dollars today (incurring debt) benefits society versus waiting until you have the cash to buy it outright.

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