Oct 202016

Debt Isn’t Bad

Private debt was invented to facilitate convenience in trade. This principle was widely accepted for most of human history. But things have changed in the 21st century. Today, many generic debt bloggers will rant about how much they hate debt with a passion and want to pay off their debts ASAP. They seem to be very debt-icated to their cause. 😛 But why would they go into debt on purpose, and then become so upset about being in debt? 😠 Isn’t that exactly what they wanted?


We don’t borrow money and pay interest to a bank out of the kindness of our hearts. Instead, I believe most of us go into debt for one simple reason; to increase our own standards of living. We take on debt because we are motivated by self interest. 🙂

Would we go into $500 of debt to buy a football? Probably not, unless it’s one that’s autographed by Lionel Messi. 😉 But how about taking on $500 of debt to experience a 3 week, all-inclusive trip to the Great Barrier Reef? Heck yes, I sure would!

If our objective or desire is worth more to us than the cost of borrowing then using debt is preferable.

If it’s not worth the debt then we don’t borrow. The same can be said for practicing mindful spending. It’s really quite simple. 😀

Nobody can force consumers to use debt. It’s possible to go through life without using debt at all. But relying on savings alone to make every purchase means losing out on choices, and opportunities. By the time a saver accumulates enough cash to start college, all his friends who used student loan debt to get ahead would already be graduating. Why would anyone want to commit to a debt free life if it means depriving themselves of opportunities? This is why I concluded that I will probably never be debt free.

Of course it’s completely possible to have too much debt, just like it’s possible to overwork ourselves. But we should all learn from our mistakes and move on. Much like being mindful of our purchases, we should be mindful of where we should be on the debt spectrum.

The Real Problem Isn’t Debt

Debt is never the real cause of people’s issues. It’s just a scapegoat.


People who say they have debt problems usually just have spending problems. They take on lots of loans to satisfy their extravagant lifestyles, and then they regret it and feel sorry for themselves for being in debt. These people are either not being honest with themselves or they lack basic self knowledge. If they voluntarily take out a loan, then that means whatever goal they want to accomplish with the loan is obviously more important to them than the cost of borrowing.


The Paradox of “Bad Debt”

To use an analogy, what would be the point if I buy a new Tesla Model S P100D and then spend all my time complaining and stressing out over how much I paid for it? I obviously value the car more than the money I traded for it. If I don’t think the car is worth its price tag, then I would simply walk away from the dealership. Sorry Elon. 😄


This is why I think the idea of good debt and bad debt is just an illusion. How can using debt be a bad thing when by definition it serves a positive purpose for the borrower? From a rational economic point of view in order for any debt to exist in the first place, it has to be the preferred choice for both a borrower and a lender in a voluntary transaction. Of course there are exceptions because consumers don’t behave rationally all the time. But most functional individuals in society are rational to an extent and are motivated by self interest. If we do something that has negative consequences then it is less likely we will do it again.

So it concerns me to learn that “struggling with debt often leads to depression, anxiety and stress.” 🙁 There are many things in life to worry about like the US presidential election next month. But I don’t believe debt should be a cause for anxiety. Getting depressed over debt is like obsessively stressing over the cost of a brand new car from my analogy above. It completely ruins the experience of whatever beneficial purpose the debt was used to pay for. It’s all about the mindset. For those with financial anxiety, I’ve discussed how to deal with the stress of debt in a previous post.

I have heard that getting a mortgage to buy a house is good debt, yet using a credit card to buy new clothes is bad debt. But to me giving debt a sense of morality like “good” or “bad” doesn’t make sense. There are no guarantees when it comes to investing. The average real estate price in Japan has been falling for 25 years. Homeowners may never see a profit from their properties. Meanwhile we know that people are judged in society by their appearances. So maybe having new clothes will attract attention from friends and acquaintances, improving one’s social life that could lead to meaningful business, career, or personal relationships.

So borrowing to buy a home isn’t always the right decision, and consumer debt doesn’t always lead to negative outcomes. Debt isn’t good or bad, it’s just a means to get what we want. 🙂

Micro-Financing Through Debt

In less developed regions of the world people don’t have access to debt like we do here in North America. Residents in these areas can’t afford to attend college, buy a house, or even buy tools and equipment to make their lives more productive. But thanks to new innovations online, websites such as zidisha.org are giving these individuals a chance to borrow much needed money. 🙂

For the first time ever these people who live in less developed countries can finally improve their lives by going into debt. 🙂 Hurray!


Kiva.org is another popular micro-lending platform that connects people who have money with people who need money. Lenders can help struggling families with small financing projects, and could even make a return on their investment. 🙂


So when we shame ourselves and other people who have debt it is disrespectful to those who don’t have access to a robust credit market. It’s a privilege to borrow money. I’m a happy homeowner today thanks to debt. 🙂 Complaining about having too much debt is like complaining about a bad hangover, or feeling too stuffed at a buffet. I get that it sucks, but it’s a first world problem. For me to express dissatisfaction about my abundance of cheap credit from a place of middle-class, western privilege, seems a bit insulting to those who are less fortunate and can’t borrow at all. 😕

So I propose we stop shaming debt. We can accomplish this by looking at debt for what it is, which is a financial contract meant to improve the lives of both parties involved. We can usually dictate when and how much to borrow at our convenience. The only debt we don’t have direct control over is government debt, but that’s a topic for another time. 🙂

Random Useless Fact:

It must have been really awkward for the first person who discovered cow’s milk.



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10/20/2016 2:41 pm

Bad debt is just a financial term for debt used to finance a depreciating asset. In most contexts it doesn’t literally mean “debt that is bad”.

Mustard Seed Money
10/20/2016 6:16 pm

I can understand your argument. I think the problem is that people don’t quite understand the positive and negative aspects of debt. Debt is a tool like anything. Some people effectively use the tool while other people have no business incurring debt. But I really like your recap.

10/20/2016 10:57 pm

You should read what you wrote. It doesn’t make much sense 🙂

The whole time you are comparing apples with oranges and with every example you are assuming everyone behaves rationally at all times. Many people are stupid and bankers know it. I am not blaming either side just recognizing reality.

The cherry on the cake is that to prove your point (taking on debt is never bad) you chose two examples that actually disprove it. The two lending microplatfroms lend for capital investment (to start businesses etc.) not to buy an overpriced plasma TV when you are already spending all that you earn (as lots of North Americans do). Of course unless that TV is for your restaurant and increases the customer experience value.

You used to put forward good arguments. Now it seems like you just slam a post together without much thought. Even worse, as if you forgot some basic you already knew.

My 2 cents 😉

10/20/2016 11:00 pm

And I am checking out for good. Good luck!

10/21/2016 4:55 am

I do agree with your point that debt is neither good nor bad.

When people are talking about “good debt vs bad debt”, it’s more accurate to say “good investment vs bad investment”. Good Investment makes money, while bad investment losses money. The problem is that some people make “bad investment” involving debt/credit.

Debt is a leverage. It behaves more like fire. “Good fire” can provide heat, light, cook food, protection against wild animals, etc. On the other hand, “bad fire” can also destroy everything.

I guess a lot of people have more experience on how to handle fire than debt properly.

In most financial literature, instead of saying something like “Fire – handle with care” or “Caution – beware of fire hazard”, they are advertising that “no interest until 2018” or “free credit balance transfer for 6 months”.

A lot of “bad debt” is the result of not handling debt with care.

10/22/2016 7:11 am
Reply to  Zeteo

Say a guy who posed as national security guard and able to get some women to give him money to buy him Lamborghini, or a girl who makes $24k/year would only carry Louis Vuitton, coco Chanel, coach, etc, but landed a vice executive president boyfriend, then husband.

Well, they both invest in their looks, took on debts to gain their rich and fancy status as trophy husband or wife.

It’s all relative, you can’t criticize their choices. Yes, it’s probably more sensible to buy a house in the hood for $56k like I do, and rent out for $1.2k per month. but, some might say, you spend all of that money for others to live at your house and take care of their every need? No! It ain’t them.

10/21/2016 8:05 am

…”We can accomplish this by looking at debt for what it is, which is a financial contract meant to improve the lives of both parties involved.”… Hummm… that’s not always the way it works out though. Debt is plain and simply an amount of money that you owe to another entity. There is no good or bad about it. In it’s simplest terms, it is something we take on in order to get something we do not otherwise have the means at the present time or within the timing we would like to attain what it is we are after. Is there good debt or bad debt, no. If you are smart you may be able to leverage the debt you have to get ahead, but that is not always it’s purpose. Do not believe the illusion there is an emotion attached to a contract or arguably a math problem. You owe someone at a future date for borrowing today, that which you would not have the present means to obtain otherwise ;). – Cheers

10/21/2016 10:51 am

Hi there,

I’m new to the site and have a general question. What currency are all of the figures on the site denoted in? Is it fair to assume CAD unless otherwise stated?

I’m really enjoying the site so far, thank you for all of your great content!

10/21/2016 1:06 pm

When you use debt to purchase assets the cashflow more money in to your pocket then the payment of the loan, then its good debt. Good debt is debt someone else pays off (like a tenant) whereas bad debt is debt you pay yourself.

Aside, what happen if you had money to buy a car outright. Instead your use the money to purchase a rental property with debt (good debt) and it positive cash flows. Then you use this positive cash flow to pay the car payments (bad debt). There might be cash flow to left after each car payment, which means you still have money working for you. So when the car payments are done you own the car, the rental property asset, and your still have your cash flow.

10/22/2016 9:00 am

Kiyosaki says if you own a house and you rent It out, then if it positive cashflows after all expenses paid, then its an asset. Otherwise that rental house is a liability.

If the debt is used for investing purposes then the interest paid is tax deductible. If debt is used for consuming (bad debt) then the interest paid is not tax deductible.

Passive Income Dude
10/21/2016 2:11 pm

Would you agree that the particular ‘use’ that debt accomplishes can be wiser in certain circumstances than in others, where it could be outright foolish? If yes, then you can reasonably come to the conclusion that ‘not all debt is considered equal.’ From there it only logically makes sense for people, who don’t have the time or the patience (or frankly the need) to clarify that they are not adding a sense of morality to their comment about debt, but that they are simply categorizing it quickly into two buckets “good” or “bad”. Not too hard of a jump.


[…] Thirty Five Blog suggests bad debt doesn’t exist.  I disagree.  As a commenter on my site has mentioned a few times, “money is an emotionless, […]

10/22/2016 3:41 pm

Sometimes I can’t believe the things I read on the internet, then I remember I’m reading the internet. Here we go again with yet another debt post. I won’t go into debunking the details, other’s have already pointed out a good handful. I will say that this post is almost meaningless due to your heavy bias towards and short thinking of debt. It would be like me writing a post about how awesome I am simply because I’m me and, hey, I wouldn’t be where I am today if I wasn’t so awesome, so I must be awesome! Awesome! Your take on debt is highly superficial; you need to develop a much deeper and broader understanding and view of credit as an interactive complex system to see the terminal effects. Unfortunately, the inherent nature of the internet does not reward or sustain material with a high degree of thoughtful insight, thus resulting in a god awful amount of personal finance blogs pumping out easily digestible fluff, garbage, or worse — incorrect information. re: RUF — rubbish. I know, I know, it’s a cartoon and is used for comedic purposes, but it’s very representative of this site’s mentality. The first person… Read more »


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