For a lot of people today, debt is nothing more than an unavoidable part of life. It could even be how you pay for just about everything from the home you might be living in, to the car you drive and even down to the small, day to day purchases like food, gas and that daily cup of coffee (or 3). It’s become so accepted in society that you probably don’t even think twice about the consequences.

No matter how debt is used or what it is used for…simply put, debt is an amount of money borrowed by one party from another that needs to be paid back. Based on that explanation, debt may not sound good or bad. As a matter of fact, no matter how you view it, all debt needs to be paid back….period! It is how it gets paid back that makes the difference.

“Good debt is a powerful tool. But bad debt can kill you.” – Robert Kiyosaki

What you need to understand is that there are two different types of debt and that not all debt is considered equal. The reality is that there is a difference between good debt and bad debt. Although there is some debate about what those differences are, the easiest way to think about it is…good debt puts money in your “pocket”, where bad debt takes money out of your “pocket”!

There are many instances where there is a fine line between the two. And the reason it is a fine line is because debt that’s used to purchase an investment can shift from being an asset by the investment paying back the debt, to being a liability by you having to pay back the debt. To realize and understand that difference is so important in your journey to financial freedom.

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