Good Debt vs. Bad Debt

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I recently received an email in response to my piece titled Survive Until You Succeed. Evidently, I have a lot of Dave Ramsey fans who follow me. And for good reason. I usually espouse the evils of accumulating debt and the importance of living below your means. Both of those are Rich Habits – Avoiding Debt and Living Below Your Means.

But I want to clarify something I think is very important. There is Good Debt and there is Bad Debt.

When you have to rely on debt to maintain your standard of living, that is Bad Debt because it means you are living beyond your means. Accumulating any Bad Debt is a Poor Habit.

When you use debt to create and build assets that have the potential of generating a future income stream, that’s Good Debt and that is a Rich Habit. The majority of the self-made millionaires in my study used Good Debt to accumulate their millions. Let me give you some real-life examples:

College Debt

Depending on your course of study, student loan debt can be good debt. One of the self-made millionaires in my study graduated Rutgers University with a finance degree and $80,000 of debt. He makes $2 mill a year and at the time of the study (2004-2008) he had accumulated about $5 million in investable assets. His goal was to accumulate $10 million and then retire. He did that in 2012 and is still working because he likes his job. He is 41 years old.

Dream Debt

Debt to finance a dream can be good debt. in early September of 2008, Musk and all of his companies were on the verge of outright bankruptcy. His Falcon 1 rocket had failed to reach orbit for the third time in early August, 2008. He was running out of money. He had gone through most of his $223 million (PayPal $) plus he had gone through most of the hundreds of millions of dollars venture capitalists and the government had invested in SpaceX and Tesla. Most would have thrown in the towel as a result of the relentless stress Musk was under. But he didn’t quit. He fearlessly kept fighting. Everything hinged on a fourth flight in September, 28 2008. If it too failed, it was over. Only it didn’t fail. The first privately built rocket made orbit. Musk was able to borrow enough money in September of 2008 to get them through the end of December, 2008. On December 28, 2008 NASA awarded SpaceX with a $1.6 billion contract. The rest, as they say is history. Today, Musk is estimated to be worth $10 billion.

Of course, Dream Debt carries with it great risk. Had that September 2008 SpaceX launch failed, Elon Musk’s financial world would have come crashing down on him. It is very likely that he and his companies would have been forced into bankruptcy.

Most of the self-made millionaires in my study relied on Dream Debt in order to fund their dreams. Had it not been for Dream Debt they would not have been able to fund their dreams and their life stories would have been very different.

Asset Accumulation Debt

Debt to acquire income producing assets can be good debt. One of the self-made millionaires in my study has $20 million in debt and $60 million in real estate that kicks off about $1 million a year in cash flow (net income). Their first real estate purchase (1981) was financed almost entirely with debt that carried an 18% interest rate.

Yes, debt can be bad, but not all debt is bad. Bad Debt can make you poor. Good Debt, on the other hand, can make you rich.


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Thomas C. Corley About Thomas C. Corley

Tom Corley understands the difference between being rich and poor: at age nine, his family went from being multi-millionaires to broke in just one night, due to a catastrophic fire that destroyed his Dad's thriving business. For fourteen years they struggled with poverty. There were eleven in Tom's family, and they lived in constant fear of losing their home.

Driven by the desire to unlock the secrets to success and failure, Tom spent five years studying the daily activities of 233 rich people and 128 poor people. He discovered there was an immense difference between the habits of the rich and the poor. During his research he identified over 300 daily activities that separated the “haves” from the “have nots.” Tom decided to write a book to share what he learned. That book, Rich Habits: The Daily Success Habits of Wealthy Individuals (1st Edition), went on to become an Amazon Bestseller in the United States forty times over a three year period. To give you some perspective, in order to be a true Amazon Bestseller in the United States, where you actually receive a specific Bestseller designation from Amazon, you need to be in the top 100 of all books sold by Amazon in the United States in a given day. Rich Habits did that for nearly thirty straight days, rising as high as #7, eclipsing such Bestselling authors such as Stephen Covey, Robert Kiyosaki and J.K. Rowlings. Imagine that - an unknown, first-time, self-published author selling more books than J.K. Rowlings!

Tom now travels the world, sharing his Rich Habits and motivating audiences at industry conferences, corporate events, universities, multi-level marketing group events, and global sales organizations’ presentations and finance conferences. He has even spoken on the same stage with famous entrepreneurs and personal development experts, such as Sir Richard Branson, Robin Sharma, Dr. Daniel Amen, and many others.

Tom has shared his insights on various national and international network, cable, and Internet television programs such as CBS Evening News, NBC News, Yahoo Financially Fit,, India TV, Australia, and a host of others. He has been interviewed on many prestigious nationally syndicated radio shows, including the Dave Ramsey Show, Marketplace Money, and WABC.

Tom has been featured in numerous print magazines—such as Money magazine, Inc. Magazine, SUCCESS Magazine, Entrepreneur magazine, Fast Company magazine, More magazine, Epoca Magazine (Brazil’s largest weekly) and Kiplinger’s Personal Finance magazine—and various online publications, including USA Today, CNN, MSN Money,,, and the Huffington Post. Tom is a frequent contributor to Business Insider,, and a few other media outlets.

National publicity has garnered international media attention for Tom and his Rich Habits research spanning 23 countries. Broadcast media, online publications, and television throughout Asia, the South Pacific, Europe, the United Kingdom, and Central and South America have shared his powerful message.

In an effort to help parents, grandparents, teachers and adults become success mentors to the younger generation, Tom released his second book, Rich Kids: How to Raise Our Children to be Happy and Successful in Life in 2014. This book was the self-help category winner of the 2015 New York Book Festival and Runner-up in the prestigious 2015 Writer’s Digest Self-Published Book Awards Contest. In 2016 Tom released his third book, Change Your Habits, Change Your Life. This book provides the latest science on habit change as well as more of Tom's unique research on the specific habits that helped transform 177 ordinary individuals into self-made millionaires.

Besides being an author, Tom is also a CPA, CFP, and hold a master’s degree in taxation. As president of Cerefice and Company, CPAs, Tom heads one of the premier financial firms in New Jersey.
Phone Number: 732-382-3800 Ext. 103.
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