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Wealth Building, Rule #1

Wealthy II

“Only borrow money to pay for things that increase in value” – Seth

People often say “Debt is bad.” It’s not quite this clear cut. Bad debt is very bad; Good debt can be very good.

Bad Debt = borrowing to buy a depreciating asset or experience (shoes, boat, car, most vacations)

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Good Debt = borrowing to buy things which increase in value (real estate, businesses, collectables) or increase your value (targeted education and training, for example).

Pay off your bad debt ASAP. Take on Good Debt, in small doses, after loads of education.

Got it ?

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Written By

Benjamin Bach is a REALTOR with Keller Williams Realty in Kitchener Waterloo, Canada (home of the Blackberry) and shows people how they can avoid a mediocre retirement by building wealth through smart Real Estate Investments. You can find out more at



  1. BawldGuy Talking

    June 9, 2008 at 11:06 am

    Benjamin — You nail head hitter, you. 🙂

    After hearing the occasional prospect hold forth in my office as to why free and clear is the only sane way to arrive at retirement, I first make a declaration, then ask them a question ending in a choice.

    Debt, in and of itself is not evil any more than water, which can cause death, is evil.

    John retires with a free and clear home and a couple debt free duplexes. His income is, net of operating expenses for the duplexes, around $30,000 annually.

    Mary retires with a home sporting a $1,500/mo. mortgage, and seven figures in investment property debt. Her retirement income is well over $150,000 annually — most of it tax sheltered or tax free.

    Which person’s retirement would you rather have?

    It’s sometimes at this point where never before experienced speech impediments kick in.

  2. Christopher Zabka

    June 9, 2008 at 1:19 pm

    This is a great distinction, Benjamin. Thanks for making it.

  3. Benjamin Bach

    June 9, 2008 at 1:41 pm

    Thanks Jeff!
    Its amazing how many people have that conveniently timed stutter, eh ?

  4. Jennifer in Louisville

    June 9, 2008 at 1:57 pm

    Excellent advice that most persons simply just do not understand. They get told by the media and self-proclaimed “experts” that they should cut up their credit cards, and get rid of all their debt so they can be financially sound. When in reality, most persons that are considered wealthy (other than by lottery winnings, or inheritance) – had to go into debt at some point to get their product/business off the ground.

  5. BawldGuy Talking

    June 9, 2008 at 2:25 pm

    Yeah, the cat they haven’t quite skinned is the one who got that tongue, too. 🙂

  6. Susan Hilton - Texas Aggie Realtor

    June 9, 2008 at 6:58 pm

    Buy low and sell high!

  7. Susan

    June 9, 2008 at 10:13 pm

    Got it Benjamin, and so true. Good job spelling it out so simply.

  8. Nickie Rothwell

    June 9, 2008 at 11:52 pm

    Words of wisdom…

  9. Bill Lublin

    June 10, 2008 at 3:46 am

    credit Cards=Bad
    Especially in Canadian $$ these days 😉
    Nice Job Benjamin!

  10. Benjamin Bach

    June 10, 2008 at 6:23 am

    Thanks Christopher

    Jennifer in Louisville, thanks for sharing that perspective. I agree with you, and shared your quote on my blog @ Check it out!

    Good advice Susan H!

    Thanks Susan – sometimes we need to be reminded what we already know, and what we should know.

    Nickie, welcome to AG !

    Bill, thanks for the coles notes. Do you have any Loonies to spend ? Lots of buying power !

  11. Jennifer in Louisville

    June 10, 2008 at 1:28 pm

    Thanks for the kind words, Benjamin! 🙂

  12. Braxton Haines

    June 11, 2008 at 12:56 am

    Great advice, now give us some examples of good debt investments, how to find them, how to get involved, etc.

    Basically, I need a blueprint to become a millionaire with little to no effort. 😉

  13. Susan

    June 11, 2008 at 1:19 pm

    “Good Debt” is somewhat of an oxymoron, don’t you think?

  14. Brian Pearson

    June 11, 2008 at 3:53 pm

    So many people gloss over when you try to explain that debt can be good. People think they have to pay down the mortgage asap and put all their money into it …

    Try this .. If you put 20,000 down on an investment property worth 100,000 and the house goes up by just 5% a year, that’s 25% on your original investment! Even if you rent it out and break even with your mortgage payments, you’re gonna come out way ahead in the long run. Pretty good retirement fund if you ask me, and I think the gains are only half taxable (capital gains?)

    Another thing I’ve seen is the “Smith Manoeuvre” .. borrow against your house to invest and then you can claim the mortgage interest on your taxes … brilliant in my opinion.


  15. Braxton Haines

    June 13, 2008 at 1:36 am


    “Good Debt” isn’t necessarily an oxymoron. I owe $200K on a house that I bought for $290K and it is currently worth $400K… so if you look at it that way, the debt definitely isn’t bad, because it could be covered (and then some) by selling.

    Just my 2 cents… I’m a glass half full type of guy though! 😉

    PS – Nice website, very clean!!!

  16. Susan

    June 13, 2008 at 9:35 am

    “Good Debt” isn’t necessarily an oxymoron. I owe $200K on a house that I bought for $290K and it is currently worth $400K… so if you look at it that way, the debt definitely isn’t bad, because it could be covered (and then some) by selling.”

    Thats definitely good debt and a good investment! Thanks for the compliment on the site.

  17. Mariana Wagner

    June 13, 2008 at 10:31 am

    Personally, I want to be 100% debt free … If I can pay cash for everything I want, then there is no need to carry around any debt. I do not want to owe anyone anything.

  18. Mariana Wagner

    June 13, 2008 at 10:55 am

    Thank you. I respect that viewpoint, and I love how technology has helped free our time up. My investments do/will consist of IRA/real estate investements. I just do not like “owing” people/companies anything.

  19. BawldGuy Talking

    June 13, 2008 at 1:33 pm

    To each their own. So much relies on comfort zone.

  20. Benjamin Bach

    June 13, 2008 at 1:38 pm

    Mariana, I know some people who own everything free and clear, including some notable exceptions to the rule – rich ones.

    Let me clarify that – wealthy ones. The *wealthy* people I know that own and develop real estate have lots of cash. Not a couple million, not 10 million, but *lots* of cash.

    Until I have that kind of kesef, I’ll use good debt and positive leverage to my advantage.

  21. Susan

    June 15, 2008 at 4:59 pm

    Being 100% debt free sounds great if I could still have a substantial amount in the bank to fall back on. Right now, I do have some good debt which I will keep for a while because I like having my money in the bank to use if I need it. No need to give it to anyone sooner than necessary.

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