Debt often gets a bad reputation, but when used strategically, it can be a powerful tool for building wealth and achieving your financial goals. According to Genesis Kelly Lontoc, a Registered Financial Planner, “Debt represents a financial obligation between a lender and a borrower, and understanding its role can make all the difference in your financial journey.”
The key to using debt for wealth-building lies in understanding the distinction between good debt and bad debt. Lontoc emphasizes that not all debt is created equal. “Good debt can work for you, helping you generate future value and create long-term financial stability.” Here’s how.
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Education: The Ultimate Investment
Borrowing for education is one of the smartest financial moves you can make. Lontoc explains, “Debt for education and training can be considered good debt.” Investing in your education can increase your earning potential, open up career opportunities, and provide long-term financial growth. “An investment in knowledge pays the best interest,” says Benjamin Franklin. Education is not just an expense; it’s an asset that pays dividends in the form of higher wages and greater financial security.
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Borrowing for Business Growth
For entrepreneurs, debt can be a vital tool for business expansion. Lontoc notes, “Debt for business can be considered good debt.” Whether it’s securing a loan for equipment, inventory, or expansion, borrowing wisely can help you scale your business and create a steady stream of income. As Lontoc states, “Good debt helps support present net worth and increase future value.” By leveraging debt to expand your business, you position yourself for long-term success and greater financial returns.
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Real Estate: A Stable Asset
Investing in real estate is another way to use debt to build wealth. Lontoc explains, “A housing loan can be treated as good debt if it provides lasting utility value to the family and offers financial gains through price appreciation and rental income.” Real estate is a tangible asset that often appreciates over time and generates passive income through rent. By using debt to acquire property, you set yourself up for future financial growth.
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How to Make Debt Work for You
The secret to leveraging debt is using it for investments that increase in value or generate income. Lontoc emphasizes, “The difference between good debt and bad debt lies in the interest rate and how the funds are used.” Borrowing for non-essential expenses or high-interest credit cards is a recipe for financial strain, but borrowing for education, business, or real estate can provide significant returns over time.
Using Debt to Your Advantage
Debt isn’t inherently bad—it’s all about how you use it. Whether for education, business, or real estate, strategic borrowing can help you build wealth and achieve long-term financial stability. As Lontoc advises, “Good debt, when used properly, can lead to a good life ahead.” By making smart debt decisions, you can set yourself up for future financial success and security.
