I’ve been taught to stay away from debt. I’ve always been told debt is a bad thing?
We would agree that non-deductible debt such as car loans, holiday loans or even mortgages are bad debt that must be paid off as quickly as possible with what you have left in your pocket after earning income and paying tax on that income.
However, asset accumulation debt is something quite different. Even our wealthiest families in Australia like the Packers and the Reinhardt’s understand that ‘good’ debt, which is tax deductible and asset producing is a tool that must be used. The wealthy get wealthier by ‘leveraging’ to buy assets that increase in value.
Borrowing to invest in appreciating assets is considered ‘good’ rather than ‘bad’ debt and provides legal tax minimisation benefits. It is much easier to create wealth using careful borrowing and investment strategies compared to saving your hard earned, after tax income.
