Good Debt vs Bad Debt: Understanding the Difference

Written By Kim Manunui

Debt can either be good or bad depending how its applied, while some debt can help you build wealth and achieve your financial goals, other debt can hijack your financial future.

Good debt is any borrowing that helps you invest in your future and potentially increase your income or net worth. Examples include student loans, home mortgages, and business loans. An education can open doors to higher-paying careers. A mortgage helps you build equity in a property that can appreciate over time. Business loans can fuel growth, innovation, and long-term profit. With good debt, the key is ensuring the return outweighs the cost of borrowing.

Bad debt, on the other hand, typically involves borrowing to purchase depreciating items or unnecessary expenses. Credit card balances, payday loans, and luxury items often fall into this category. These debts usually come with high interest rates and no increase in value. Over time, bad debt can erode your financial stability, making it harder to save or invest for the future.

The distinction isn’t always black and white. For instance, a car loan could be considered good or bad depending on whether the vehicle is essential for earning an income and how manageable the repayments are.

The golden rule is to borrow responsibly. Before taking on any debt, ask yourself: Will this debt generate future value? Can I afford the repayments without compromising other financial goals?

By understanding and managing good and bad debt wisely, you can build a strong financial foundation, protect your future, and make debt work for you - not against you.

Kim Manunui

Hi, I’m Kim and I work with a great team to help individuals, as well as small and not so small businesses get their message, product and services to the world using digital media and creating wonderful websites that don’t cost the earth.

I was born in Canada, and grew up around Vancouver and the mountains of British Columbia. My love of pristine environments led me to New Zealand and eventually to the mountains, lakes and rivers of the central North Island which is home. My family’s heritage is here, and it’s from here that Korio traverses the planet.

The digital world is never static and neither are we.

And I say ‘we’ because I work with an awesome group of talented people who I gather together as required to complete a project.  Whatever your business, not-for-profit or individual needs are we gather the best team to get the job done.

Collaboratively we are creative, share sustainable values and work hard for great outcomes because that’s the buzz of satisfaction that drives us.

If you have an audience and market to reach, we can make that happen. Creative design, words that work and smart behind the scenes stuff that cuts through the online noise. We’ll design your website and then build it. We’ll manage the content as well as all your hosting needs. We can handle your online advertising so you get noticed,
and we’ll manage your social media presence so you get the clicks, likes and engagement to grow your business. All within the budget you set, because none of this needs to cost the earth.  And the job doesn’t stop when your website goes live. We are your virtual business partner.

https://www.korio.co.nz
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