Debt can be a nasty four-letter word, but is it always bad?

You’re pulling my leg, right? You’re asking me, Debt Man, a Generation Xer, whether debt is evil?

Debt, like greed and Miley Cyrus, get bad reputations in times of crisis. Thanks to Gordon Gekko and Wall Street, greed got it in the 1980s stockmarket crash. Debt copped it more recently with the Global Financial Crisis. Miley’s problems started with Billy Ray.

But here are some facts.

Without debt, Gen Xers could neither buy homes, nor investment properties. Without debt (credit cards), we’d have to carry wads of cash and visit banks on a daily basis. Starting businesses would often be impossible without debt.

And that’s to say nothing of the other (somewhat less appealing) uses for credit, including purchasing cars and furnishing homes.

Understand this: Debt is a tool. Used correctly, it can play an important part in creating long-term wealth.

But used by the financially reckless, debt can be a deadly weapon (as can cars, golf clubs and Susan Boyle CDs).

Plenty claim debt is evil – if you want something, you should save for it. And that’s generally right about consumer goods, cars and holidays.

But for a house? Seriously? No-one can save their way to a home … unless they want to live in a slum in Delhi, or on a caravan site in Nowheresville. Or they have an inheritance come in early.

Debt is almost a quintessential part of Gen Xers lives – certainly of those who wish to get ahead financially.

Sure, debt is also a four-letter word. But if debt is nasty, then talk dirty to me, baby!

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.
investing with debt, mortgages