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Is All Debt Bad?

Written by: Jorge Contreras, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

 

Most people think debts are bad. I mean, who would voluntarily want to owe others money if they have enough or they can earn more in the future, right? But debts have more to them than meets the eye. If you also think all debts are bad and you’re looking for ways to build a new income source, you might be missing out on a good solution.

As with everything else, debts aren’t black and white. That means that just because you owe some money, doesn’t mean you’re bound to experience bad things financially because of it. Debts and loans are how rich people get richer. But how do they do it?


Good and bad debts


Now there are two kinds of debts: the good kind and the bad kind. You can think of them as good fats and bad fats. One nourishes the body, and the other does the opposite.

Good debts can help open up more opportunities, while Bad debts can bring you into a downward spiral of more debts and financial ruin. Now while the effects of these two kinds of liabilities are as clear as day, the line between them is quite fine. Ultimately, what separates them is how they are managed.


Imagine yourself taking out a loan from a bank. What’s your purpose for it? Is it just to buy your wants? Or are you using it to start a business? If you see yourself using that money to increase your current or future net worth, then it’s a good debt. But if it ends up in your closet, in your garage, or in your hand as the newest smartphone model while you still have months to pay for it, then it’s bad.


How to turn your debts into good ones


Now if this is the first time you’re reading about good debts because you’re used to hearing about bad ones, this is a good opportunity to learn more about it. Here’s a perfect example – Good debts can be used to create cashflow-producing assets. Plus, as we’ve mentioned, it’s how the rich get richer too! We’re talking about that in the next section of this article.


But before we get there, we’re listed a few more ways to turn your debts into good ones:


1. Investing in education or career development


One of the best ways to turn your debts into good debts is to use them to enrich your knowledge base. You can take courses, use your money to pay for premium training under the best coaches or finish a degree that can land you a higher-paying job in the future.


2. Purchase assets that appreciate in value


Another way to put your debts to good use is to purchase assets that appreciate over time with it. You can buy real estate, stocks, or mutual funds with the money and enjoy their increasing value now and in the future.


3. Start a small business


Starting a small business has the potential to give you a significant return on investment for your borrowed money. With your credit, you can start a side hustle or a full-time venture, slowly pay off your debt with the income, and live off the remaining profit.


These three ways are just some of the best options you can use to put your liabilities to good use and ultimately turn them into assets. However, these three are not just the only options out there. In fact, there’s another strategy that I apply to my trades and it’s the one that helped me grow my short-term rental business.


The “Balance Transfer” strategy


When it comes to scaling your business, inevitably, you're going to need more capital. And at some point, you’ll be at a loss and you’ll need financial help from somewhere else. This is where the “Balance Transfer” strategy can help.


But before I get into the details of the balance transfer, I’d like to show you first the principles that come into play when you use it. So basically, this strategy is a kind of loan where you utilize other people's money to start your own business.


In my years of experience in the field of entrepreneurship, I've learned that wealthy people rarely use their own money, even if they have their own money.


A rich person can have hundreds of thousands or millions of dollars in the bank, but they choose to still use OPM or other people's money. Just imagine launching new businesses while utilizing your resources. At one point, you're going to run out of finances.


But if you use other people’s money to grow your own, like getting loans from a bank and using it to scale your business, you’ll never run dry. This is a great skill to acquire if you truly want to build your business empire.


Now I'm in a short-term rental business where I’ve started with the Subleasing method where I rent other people’s properties, ask the landlord if I can use them as a listing on Airbnb, launch them, and live off of the profits. And I have succeeded in it. It’s where I got my first million.


However, there also came a point when I wanted to scale but I couldn’t because my resources were still not enough to achieve the bigger goal that I wanted. This is where the balance transfer strategy came in.


Balance Transfer is when you transfer money from your credit card (which preferably should have a low-interest rate) into a checking account. You can then use this money in your checking account to start a business.


Typically what I've done is use that money to pay for the rent, the deposit, and the furniture to launch a new Airbnb. Then I'll take the profits from my Airbnb to pay off the credit card. And I repeated the process over and over until I reached my financial goal.


If you want to try this on your own business, you can just go on Google and type “business credit cards balance transfer promotion”, and then find a website called NerdWallet. Then you’ll find a list of all the best business credit cards where you can do this with zero percent interest for up to 21 months. Pretty simple, right? Go ahead and try it.


Conclusion


To sum it up, not all debts are bad. If your debt is just taking your money out of your pocket, then it’s a bad debt. If it’s adding value to your finances, then it’s the good kind. The secret is how and where you use it.


Want to know more about starting an Airbnb business through the Subleasing method? Feel free to download and check out our free training guide here so you can get your Airbnb business going.


Follow me on Instagram, YouTube, Podcast, and visit my website for more info!


 

Jorge Contreras, Executive Contributor Brainz Magazine

From poverty to a million-dollar business, Jorge Contreras is a real estate investor and coach. He started his real estate journey over 10 years ago, and he launched his Airbnb business 5 years ago. Before that, Jorge was overworked and underpaid. He barely had time to spend with his family, and his business wasn't exactly thriving. Once he got into real estate, he realized the potential, especially with Airbnb and short-term rentals. When he became a millionaire before the age of 30, he decided to share his knowledge with all the people who have the need to spend more time with their families and less time working. Jorge has already helped over 3000+ people reach their goals with Airbnb.

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