How to earn money from your debt

You were probably taught by your parents to get a good education, a good job, buy a home, work really hard, and pay off your debt.


But, in my mind, that’s not a productive use of the equity in your home.

Instead, you should recycle the equity in your home and convert it into productive debt to buy income-producing assets.

But before we start delving into all things debt recycling, let’s start out by clarifying the difference between good and bad debt, and how having debt can actually benefit you and set you on the path to financial freedom.

The three types of debt

1. Bad debt:
This is debt against assets that depreciate in value. Bad debt generally refers to things like credit cards or other consumer debt that does little to improve your financial outcome.

2. Necessary debt:
This is the non-tax-deductible debt against your home, but it’s something essential that can’t really be avoided.

3. Good debt:
This is a tax-deductible debt against income-producing and appreciating assets. Think loans against residential investment properties business loans.

This is the type of debt that can help build wealth and bring you cash flow over time.

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Jason Gwerder
Monday, 15 March 2021

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