Debt is like fire: a powerful tool that can either warm your home or burn it down. And guess what? I’m a pyromaniac!

Am I in debt? Ya, sure.

Am I worried about it? Nope.

While we've all heard horror stories of crushing credit card bills and lifetime loan payments, here's the truth—debt isn't inherently evil. It's how you use it that matters.

🔑 The Golden Rule of Debt

Good debt builds your future; bad debt steals from it. It's that simple, really.

But what makes debt "good" or "bad"? Let's break it down.

💡 Good Debt: Your Wealth-Building Ally

Good debt is your ally in building wealth. Here's where smart borrowing makes sense:

1. Education Loans (When Done Right)

• The Math: $80,000 loan for a AI & robotics degree → $300,000+ annual salary. You are your greatest incoming-generating asset.

• Key Point: Choose degrees with strong return-on-investment potential.

2. Strategic Mortgages

• The Math: $300,000 home purchase → $450,000 value in 10 years. But! Don’t overextend and buy something that will have seriously high mortgage payments.

• Bonus: You live in your investment while it grows.

3. Business Loans

• Success Story: Amazon started with a $250,000 loan. Debt can be a great tool to launch your next venture, just make sure you can manage it and have a clear plan!

• Key Point: Clear business plan + market demand = worthy investment

4. Income-Producing Real Estate

• Example: $200,000 duplex generating $24,000 annual rental income

• Double Win: Monthly cash flow + property appreciation

🚫 Bad Debt: The Wealth Destroyer

Warning: These debt traps look tempting but lead to financial headaches:

Credit Card Debt

• The True Cost: That $300 concert becomes $450+ with minimum payments.

• Caveat: If you pay off your credit card in full every month, then that’s fine! Plus, you’ll usually snag some sweet credit card points.

Luxury Vehicle Loans

• Reality Check: That $70,000 car becomes $35,000 in five years thanks to vicious depreciation. Will that make you richer? Definitely not.

• Caveat: If you buy used cars (especially ones that could be future classics, see Monday’s newsletter), those don’t lose nearly as much value

Lifestyle Loans

• Warning Sign: If it doesn't generate income or appreciate, think twice. You don’t continuously need the new thing or a bigger place or a fancier watch.

• Caveat: Enjoy your life. You don’t have to punish yourself and live a stoic life, but just be reasonable. How much fun we have is determined by who we spend time with, less what we spend time doing.

Your Smart Borrowing Playbook

Before taking on any debt, ask yourself (out loud, preferably) one crucial question: "Will my future self thank me for this decision?" If you're borrowing for something that will increase your income or build lasting value, you're probably on the right track. Why ask out loud? Because someone will hopefully hear you and tell you “no” when you’re holding this pair of shoes:

Here’s a practical guide:

• Keep your total monthly debt payments under 30% of your monthly income. Above that, you're walking a dangerous line.

• With interest rates, anything under 5% (like most mortgages) can be good debt if used wisely. Above 10%? That's usually a red flag. Those credit card rates hovering around 20%? That's not just bad debt—that's wealth destruction.

• Use the 24-hour rule - Before any major purchase, wait one day. If it still matters tomorrow, it might be worth it.

Is debt inevitable?

Maybe, but the right kind is useful. Remember, the wealthiest people in the world use debt strategically. They understand it's not about avoiding debt entirely—it's about using it as a tool for growth rather than a crutch for consumption.

So how do you tackle the debt you build? Two strategies:

• The avalanche method: target high-interest debt first - eliminates your biggest burdens fastest, but it can feel like an uphill battle at times

• The snowball method: eliminate small debt balances first. This can help you build positive momentum, but ultimately it’s best to attack the hard problem (high-interest debt) first.

Your next move

This week, take five minutes to list your debts and label them as either "good" (wealth-building) or "bad" (wealth-draining). This simple exercise might completely change how you view your financial decisions.

The bottom line? Debt isn't the villain of your financial story. Used wisely, it could be the plot twist that leads to your wealth-building happy ending. And I’ll be right there. You wouldn’t say anything to me, nor me to you. But we’d both know, that you’d made it. That you were happy.