Quote from: savetheFORUM on Today at 04:06:07 PM

Quote from: Captain Corporate on March 08, 2022, 09:31:36 PM

Debt is not a bad thing, not inheritly. There are bad debts and there good debts and you need to figure out which one you are on the side of. If you take out a mortgage to buy a house, pay about 1.5k monthly on the mortgage and make 3k on the rent, while the price rises %1 above inflation a year, that is a good debt to have. If you take out a loan, or just use a credit card to buy the new iphone, that is a bad debt.

That's actually a great explanation. The concept of good and bad debts is actually refreshing to read and understand. It makes sense to have debts if you know that the overall value is going to be positive from those debts. It's similar to a businessman taking loans from bank at let's say 10% and easily making 20-50% profits from the same money, then that's good debt.

That said, it's not easy to actually identify whether your plans and calculations are going to be viable because there are hundreds of other aspects we won't account for when making the calculations.

Of course financial basics is to attempt to assess whether you are engaging in debt in order to make an investment versus engaging in consumption... some ways of spending money have opportunities to get a return, and for sure consumption by definition either depreciates in value or is completely consumed around the time of purchase.

Even within the category of investments there is going to be levels of uncertainties regarding how sure is the bet (how likely is it that you are going to get anticipated levels of return including the consideration regarding how much it is going to cost you to take on the debt).

The mere fact that the bet (investment) is risky or uncertain should not completely rule out whether to attempt to earn extra value in that direction - and like OP said, the rich use debt all the time to magnify their wealth - yet also, merely because the rich do it (and may well be successful) should also not be the ONLY consideration regarding whether to get into the debt because the loan terms may well be different between people and other individual circumstances are surely different between people too.

Don't get me wrong. On a personal level I consider myself to be a pretty conservative investor; however, I find it a bit annoying to find so many members posting in this thread and blanketedly asserting that other members should not use debt blah blah blah... and assuming that the mere fact that there is additional risk should warrant not to employ the use of debt.

I am actually a proponent of learning and practicing and figuring out your individual situation first before employing debt, so in that regard, even starting by investing small amounts and attempting to learn how to do it before investing larger amounts and before employing more sophisticated tools, such as debt.. are all better practices than getting greedy or risking a lot of capital (whether using debt or not) before you have gotten some good grasps on various other more basic aspects of learning about both your own personal finances and your own psychology, too.