Why Debt is good? #UtangPaMore

Why Debt is good? #UtangPaMore

“Yes!!!! I’m finally debt free!”

Shouted happily by my friend.  I can still remember the big smile on his face, nakakatuwa to see him that happy…

But then, I interrupted him and told him na there’s nothing wrong naman with Debt. In fact

Rich People use Debt to leverage.

Obviosly na-spoil ko ang celebration nya na Debt Free na sya.. I feel the need to explain.

I told him.. You see may 2 kinds ng Debt.

 

Good Debt and Bad Debt

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Good Debt

Rich people use Debt to leverage – using OPM (Other People’s Money)

They borrow money from banks or other institutions and use the money to expand their business. It is considered Good debt because the money will be used to buy an “Asset”

In simple terms,

Asset is something that will put money into your pocket

One can buy a car and it can be a good debt,How? make it an uber, grab or a service. If you are earning from it, then that’s an Asset, a Good Debt

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Bad Debt

Now, There is also Bad Debt. This happens when you borrow money and buy for example, a Cellphone kahit may ginagamit ka panaman na cellphone.

Or buy a new laptop kasi gusto mong mag upgrade for computer games. That’s bad debt, bad debt because you borrow money to buy a liability.

Liability is something that takes money out of your pocket.

I told to my friend na while the middle class are avoiding Debt, The Rich are using OPM to further leverage. Kaya they are getting richer and  the  poor gets poorer e.

This is the importance of Financial Literacy. It may be simple as it may sound, pero a lot of people don’t know this, Kasi it’s not being discussed sa school.  I told my friend na, now you know an Asset, Liability and Debts, now #UtangPaMore

PS If you want to learn more regarding OPM or Other People’s Money, Debts and Assets and Liabilities Please share and subscribe to www.NolanLazaro.com Now!

 

 

 

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