• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Good debt vs. bad debt

There’s a group of uber-wealthy entrepreneurs who consider debt an essential tool in their arsenal. Cardone is firmly in that group.

“At Cardone Capital we always use debt but never over leverage, keeping our debt leverage in the 65% range,” he once said.

“Goldman Sachs ain’t worried about debt,” he told Rich Somers. “JP Morgan’s not worried about debt. Elon Musk is not worried about debt.”

Indeed, Musk has borrowed billions of dollars to acquire companies such as Twitter and billions more through loans against his shares to fund his other ventures.

Similarly, Jeff Bezos borrowed $2 billion to finance Amazon’s growth during the dot-com bubble.

Entrepreneurs like Cardone, Bezos and Musk consider debt used to expand a business or bolster investments “good.” Borrowing money to invest in appreciating assets, such as a house, or to enhance your skills, such as student loans, could be considered beneficial.

However, some entrepreneurs believe that borrowing money adds risk that is simply not worth it.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

Is all debt “bad”?

Like any other investor, Dave Ramsey financed his early real estate investments with debt. However, a brush with bankruptcy in the 1980s left him scarred for life.

Now, the financial guru insists on a debt-free path to wealth. “Debt always equals risk, and it’s always dumb,” he wrote on his website last year. “While your calculator may say that leveraging debt can help you get rich faster, it doesn’t consider risk. But when you pay cash for everything, you don’t have to worry about that risk.”

These sentiments have been echoed by the world’s most famous investor: Warren Buffett. “You really don't need leverage in this world much,” Buffett once said. “If you're smart, you're going to make a lot of money without borrowing.”

Fellow billionaire Mark Cuban once explained that paying off debt was like making a good investment: “Whatever interest rate you have — it might be a student loan with a 7% interest rate — if you pay off that loan, you’re making 7%. That’s your immediate return, which is a lot safer than trying to pick a stock or trying to pick real estate, or whatever it may be,” he once told CNBC.

It seems clear that there is more than one path to success. For most people, the choice between “good debt” and “no debt” could depend on their investment style and appetite for risk.

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.