There is no such thing as good debt

I am going to go against the popular saying that there is good debt and bad debt and say that there is no such thing as good debt for 99.99 percent of people. Not unless you are ultra wealthy and playing an entirely different game.

Instead of good debt and bad debt, I prefer to think of it as manageable debt and non manageable debt. And even manageable debt is still debt.

Debt Takes Away

Debt always takes something from you. It takes interest. It takes cash flow. It takes flexibility. It takes peace of mind.

People love to call a mortgage good debt because you are buying an asset. They call student loans good debt because you are investing in yourself. They call business loans good debt because they can generate income.

But every one of those still comes with an obligation. A required payment. A timeline. A lender who expects to be paid before you build wealth. That is not good. That is a liability you are carrying.

Debt Interest Is Usually Higher Than You Think

In most real world scenarios, the interest you pay on debt is higher than what you earn on your safe savings.

Credit cards can run 19 to 29 percent. Lines of credit might be 7 to 12 percent. Car loans 6 to 9 percent. Even mortgages are no longer “cheap” in many environments. Meanwhile, your savings account might pay 3 percent. Your conservative investments might average 4 to 6 percent over time. The spread matters.

If you are paying 8 percent on a loan and earning 4 percent on savings, you are effectively losing 4 percent every year on that money. That is guaranteed. Markets are not guaranteed. Debt payments are.

Even when someone argues that they can invest at 10 percent and borrow at 5 percent, that only works in hindsight and only if everything goes according to plan. Markets do not move in straight lines. Debt payments do.

Debt Reduces Cash Flow

Cash flow is freedom. Every dollar committed to debt payments is a dollar that cannot:

• Be invested
• Build an emergency fund
• Fund a business idea
• Be used to reduce work hours
• Cover a surprise expense without stress

When you carry debt, your monthly expenses are artificially higher. That means your required income is higher. Which means your dependency on your job is higher.

If your goal is early retirement, flexibility, or simply peace of mind, debt works against you. You cannot say you are financially free if a bank still owns part of your monthly income.

Debt Increases Risk

Debt amplifies risk. If your income drops, the bank still expects payment. If you lose your job, the lender does not pause your obligation. If the market drops and your investments fall, your loan balance does not fall with it.

Debt removes margin. And margin is what protects you during hard times. Without debt, a job loss is stressful. With debt, it can become a crisis very quickly.

The Psychological Cost

This part rarely gets discussed.

Debt sits in the back of your mind. Even manageable debt changes how you think. It makes you more cautious about taking risks, switching careers, starting something new, or even saying no to things you do not enjoy.

There is a quiet mental tax to knowing you owe money. When you are debt free, there is a lightness to your financial life. Decisions become cleaner. Simpler. That is worth more than a theoretical spreadsheet advantage.

The Only Time Debt “Works”

The ultra wealthy use debt differently. They borrow against appreciating assets, at extremely low rates, with large buffers, diversified income streams, and access to liquidity most people do not have.

They are not borrowing because they need to. They are borrowing because it optimizes taxes or leverage within a controlled system. That is not how most people use debt. Most people borrow because they want something now and will pay for it later. That is consumption with interest.

Manageable vs Non Manageable

Some debt may be manageable. A modest mortgage within your means. A small student loan with strong income prospects. A short term business loan with clear cash flow.

But manageable does not mean good. It just means you can survive it without breaking. If your ultimate goal is freedom, simplicity, and control over your time, then less debt is always better. Zero debt is even better.

Debt is not good. It is a tool. And most tools, when misused or overused, cause damage. The fewer financial obligations you have, the more of your life you own.

“You lied - you have a car payment”

Now, before someone pulls up one of my older posts and says, “Wait a second, you have a car payment,” let me address that.

Yes. We have a car payment. Yes. I just wrote 1,000 words about how debt takes away. No. I have not lost my mind.

A few years ago we were offered a car loan at 6 percent. At the same time, one of my REIT holdings was yielding north of 8 percent. On paper, that spread worked. Keep the money invested at 8 percent, borrow at 6 percent, and collect the difference.

In that specific situation, with stable income, a strong balance sheet, and the ability to wipe out the loan at any time, it was manageable debt.

But notice the words I just used. Manageable. Specific. Controlled. Optional. That is very different from saying debt is good.

The Math Worked. The Risk Was Managed.

The reason that car loan worked for us was not because debt is magical.

It worked because:

• We could have paid cash.
• The payment did not stretch our monthly budget.
• We had margin.
• The investment income comfortably exceeded the interest cost.
• If rates or income changed, we could eliminate the loan quickly.

That is not the same thing as financing a car because you cannot afford it. That is not the same thing as stretching to the maximum payment a bank approves.

Most people do not run that calculation. They run this one:

“What is the monthly payment?”

That is how manageable debt quietly becomes non manageable debt.

Even When the Math Works, Debt Still Takes

Even in our case, the loan still took something. It added a required monthly payment. It increased our fixed expenses. It added one more moving piece to our financial life.

Yes, the REIT was yielding over 8 percent. But that 8 percent was not guaranteed. Dividends can be cut. Prices can fall. Interest rates can rise. It has been almost 2 years and I am still earning that 8 percent, but things can change.

The 6 percent loan payment, however, was guaranteed. That is the difference. One side of the equation is flexible. The other is contractual. And that is why I still say there is no such thing as good debt. There is debt where the math works and the risk is contained. There is debt where you are exposed and hoping nothing goes wrong.

We made a calculated decision in a controlled environment. That does not suddenly turn debt into a wealth building superpower. It simply means we used it carefully and temporarily.

The Bigger Point

If tomorrow that REIT yield drops below the loan rate, or if our risk tolerance changes, the loan goes away. That optionality is what makes it manageable.

Most households do not have that flexibility. They are committed to car loans, credit cards, lines of credit, and mortgages that require two full incomes just to function. That is not leverage. That is dependence.

So yes, we have a car payment. And yes, in that moment the math worked in our favor. But I would still rather live in a world where I owe less, not more. Because the goal is not to win a small interest rate spread.

The goal is to own more of your time, your income, and your decisions. Debt, even when it works, is still a claim on your future. And I would prefer to keep as much of that future as I can.