I’m currently in the middle of nowhere Canada with Girl Ninja and 50 high school kids watching them experience the best week of their lives. I imagine I’m having more fun than you right this moment so be jealous. In the meantime I’m upcycling a former post of mine. Enjoy.

I was talking with a man
yesterday who said, “I was raised with a strong German upbringing so I don’t mess around with debt and am proud to be debt free.” As we continued chatting about his finances he eventually told me he has both a mortgage payment and a car payment. Wait, hold the phone.

Hate to break it to ya buddy, but you’re not debt free if you have a mortgage and a car payment. Have these types of loans really become such a standard in our culture that we forget they’re still debts?

I get it. Some people think certain debts are “good” and others are “bad”. This man has obviously decided for himself that mortgages and car loans can be classified as good debt, but last time I checked, my blogs name wasn’t Punch Bad Debt In The Face. No, it’s Punch Debt In The Face, because I believe “good” debt is a term we Americans use to feel better about ourselves and our financial situation (It’s like being called festively plump instead of fat). I don’t discriminate, I punch all debt in the face, regardless of how “good” it might be.

What I think this man

, and many others, mean when they refer to things like mortgages and student loans as “good” debt is that these types of loans are not as bad as credit card balances or payday loans. How about we change your perspective though and admit that “good debt” is really just another way of saying “not-as-horrible-but-still-pretty-sucky debt” (has a nice ring to it doesn’t it).

Obviously this gentleman is comfortable maintaining a car payment and a mortgage as part of his personal finances, and to be perfectly honest, I have no authority to tell him to change his ideology (contrary to popular belief one can have debt and still be financially responsible), but I can definitely call him out when he tries to pretend that he is debt free. I am debt free sir, you are not.

Has our culture become so numb to consumerism that we think we can have a car loan and be debt-free at the same time? Do you believe in good debt?

Why or why not? Should I have punched this man in the face for being so naive?




  1. A few months ago a friend confided they had a large amount of credit card debt due to emergency pet surgery and not living within their means after they started a new job. He brought it up last week and said was so happy he was able to take care of it. I asked him how he was able to take care of it and he got his brother to cosign a loan to pay off the credit cards…

  2. You can absolutely have good debt. Mortgage rates are currently lower than historical market return, that makes them good debt. If you pay cash for a house right now, you’re losing the difference in interest that the Mortgage charges and the rate at which the market climbs.

    • Agreed, with the condition that you have enough money to pay off the debt at any moment and that the money is making a return higher than the interest rate on the mortgage. But if on the other hand you don’t have that money then you are actually still losing money from the debt.
      Note that I am ignoring appreciation, inflation, comparable rent expenses, etc.
      For example let’s say that person A is paying roughly $500 a month in interest (Not P&I+Escrow, just I) while investments are bringing in roughly $100 a month. You still are decreasing your net worth at a rate of $400 a month (assuming the house does not appreciate). Still is “bad” debt by the definition that “good” debt increases your net worth.

  3. I would not characterize debt as good or bad! The only debt I think is worthwhile is when you buy assets that appreciate. I have a mortgage that will be paid off by the time I retire in less than 4 years. I also have a (1.99%) car loan that will be paid off in less than 3 years. I took out the car loan because I did not want to liquidate some investment to purchase a car. I am earning far more than the 1.99%.

  4. car loan 0% interest will be paid off next month
    mortgage 3.99% interest for the next 28 years
    student loan .1% variable interest for another ~19 years (how i got it like that is a long story)

    whats so bad about this debt? i get to enjoy my house now and have a hedge against inflation. i need my minivan if i want to go anywhere with 3 kids. and my education allows me to earn enough money so my wife doesnt work.
    at these rates im not speeding up any payments on these loans.

  5. No debt is ever good debt. Some serve a means to an end like putting a roof over your head or giving you a ride to work but ultimately it has to be nicer to own those things outright.

    I struggled with the idea of buying a house with all cash or doing financing and went with all cash. In the end I still had plenty left over to eventually invest (though significantly less), and while I won’t be seeing the nicer returns of investing part of that money, those returns would have been purely hypothetical and could just as easily be losses. I also feel like since I’m young, it’s nice to rap up the house right now and then just build on the rest of the accounts to minimize stress.

  6. I have heard that before because people associate debt with only credit card debt. I think he should have been punched in the face, as soon as the debt info was extracted. Ha funny post.

  7. Good debt = debt you can make money on. If you borrow at 0% and invest at 1%, that’s good debt. (some people call it leverage)

    Bad debt = debt that costs you money. If you’re paying 5% interest, that’s bad debt.

    That’s how I define good and bad debt, which means almost all debt is bad. However, there is some good debt.

  8. If Ninja is allowed to repeat himself, so am I. Against the “all debt is bad” crowd, I offer the following, edited from two comments I made here a couple of years ago:

    The most likely debts you will incur in your lifetime are student loan, mortgage, small business loan, and/or car loan. But remember your double-sided bookkeeping: every liability must be balanced equally by an asset. So you’re not only taking on debt in each case, but you’re acquiring a valuable asset.

    A rational approach to debt, it seems to me, is to ask whether or not the benefits of acquiring an asset outweigh the interest you might have to pay if you need a loan. Would you forego a college education, for example, if you needed to take out a student loan? I can’t see any benefit in paying interest on a credit card because the annual rates are exorbitant. But if you can negotiate a good rate on a mortgage, student loan, or even (shudder!) a car loan, and you have reasonable expectations of paying it off on schedule, then I don’t see any harm in taking on that kind of debt. You could save up for decades to pay cash for your house, or you could take advantage of today’s historically low interest rates. And as your income increases, your monthly payments become a smaller portion of your expenses, and over time you also are paying with cheaper dollars due to inflation.

    In other words, I regard debt as necessary – neither good nor bad – in cases where you want to acquire a worthwhile asset but can’t pay cash in full. And so you pay a higher purchase price in order to take more time to pay. It’s a trade-off, not the secular equivalent of a mortal sin, and I don’t let it bother me.

  9. He’s probably making the distinction that his debt has assets against it, and at good rates, as opposed to being possibly at high rates and against goods already consumed (money already spent on food, experiences, items at various stages of depreciation, etc.)

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