The Truth About "Good Debt"
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I love a good oxymoron. Act naturally. Genuine imitation. Fashionable crocs. But there's one that really salts my apples, and that is good debt. You see, a lot of people mistakenly put debt in two categories, good debt and bad debt. And bad debts are considered to be things like credit cards, auto loans, and good debts would be things like student loans and mortgages. But here's the deal. The idea of good debt is a myth. Just like the idea that Avril Lavigne was replaced with a lookalike named Melissa. Whole other video there.

You can't just leave me hanging now. But in this video, we're gonna break down why good debt isn't actually good, and I'll share the one type of debt I'll let you get away with. But before we get into it, do me a tiny giant favor and hit that like and subscribe button. All right, so what are the so-called good debts?

Well, the first and most advocated for is student loans. And contrary to popular belief, putting the word student in front of loan doesn't magically transform it into a debt of wonders. But you've still probably heard all the justifications for them. They're an investment in your future. They'll have the best return for the rest of your life. You have to pay a premium for a good education. Surely, with all of these good reasons, everyone must be so glad they took this good debt on, right? Wrong.

In fact, almost half of all people who took out student loans say they regret it. So why are half of borrowers plagued by remorse and regret? Well, for starters, student loans typically have a high interest rate of at least 5.5%. And the average borrower graduates with $40,000 in student loans. Plus, student loans can take 10 to 20 years to pay off. Now, let's say you have that $40,000 in student loan debt at 5.5% interest and you pay $200 a month.

it would take you 45 years to finally pay it off. And you'll have paid $68,000 in interest on top of the 40K. So just to recap, you'll be paying off your student loans well into retirement and you'll have paid over $100,000 for an education that was only worth 40. Gross.

And even if you increase your payment to $275 a month, you would get rid of your loans in 20 years and you'd still be paying an additional $26,000 in interest. Not to mention, every penny of that interest is going straight into the pockets of the lenders. So is it really a coincidence that they're the ones trying to brand student loans as good debt?

Just food for thought. Plus, thanks to the insane burden that is student debt, many Americans are putting off important things in their life, like finding a new job, getting married, having kids, buying a home, saving for retirement, traveling, and even paying off other loans. So it's no wonder that 62% of people say that their student debt is negatively affecting their mental health. Doesn't all this make student loans sound about as appetizing as an aluminum foil sandwich with a mouthful of fillings? Don't think about that too long.

Too late. Here's the deal. Americans owe $1.75 trillion in student loan debt. And everyone's been all up in arms about how student loan debt is so bad that politicians have to forgive it. Well, if it's so bad, then stop saying it's good debt. Rant over. Rant over.

Next up is the old home equity line of credit, otherwise known as a HELOC. A HELOC is like a second mortgage where you borrow the equity you have in your home, meaning you're essentially taking money away from the part of your home that you own and turning it into more debt. Also, David Blaine's worst magic trick. You roll the four. Show everybody what card...

Now, the rationale here is something like this. Hey, my home value's gone up. I can now borrow from my house instead of the bank. Time to remodel the guest bath, put a pool in, and get rid of some other bad debt. But here's what these people aren't thinking about. Number one, a HELOC is a secured debt, which means your home is on the line as collateral. So if for some reason you can't make that payment, you end up losing the house in foreclosure. Number two, HELOCs tend to have a bunch of sneaky fees tacked on.

Transaction fees, minimum withdrawal fees, inactivity fees, early termination fees. And number three, which is the real kicker, most HELOCs have variable interest rates. That means as interest rates go up, as you may have noticed they do, your payments can also go up. And right now, the average HELOC interest rate is at 8.5% because these rates typically follow the prime interest rate. And then you can count on lenders to add a little more to that, like a little frigging cherry on top.

And to give you an idea of how the prime rate can change, this graph shows all the changes since 2001. And if we're going to be honest, it looks like a roller coaster designed to kill you. Kingda Ka, more like Kingda Nah, bruh. And that joke was for all of you roller coaster tycoons out there. I feel so seen. So what's the best way to avoid dying on this interest rate loop-de-loop of death? Well, just don't get one in the first place. If you don't have the cash for the renovation or the pool or whatever else, don't do it. All right, on to the next.

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Sorry, that was, well, you know exactly what happened, but go check them out. Links in the description. They're awesome. All right, let's get back to this good. Sorry. I really should. The one time I don't put it on do not disturb. And if you want to know who this is, I'll tell you in a minute.

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It's free. All right, back to good debt. Now, the last type of good debt we're talking about is mortgages. You see, influencers are pitching your mortgage as good debt by advising that instead of paying off your low-interest mortgage debt with any margin you have, you invest the extra money instead. To which I say, you could do that or you could make a good decision for your future. Here's what I mean.

When you invest and your money grows, that is taxable income. However, when you pay down your mortgage, there are no taxes to be paid. So this is not apples to apples. And that line of thinking assumes that you're not already investing while paying down your mortgage. But I always advise people to be investing 15% of their income while paying off their home early with any extra money. And that's exactly what I did a few years back with no regrets. Plus, you're

Your mortgage is amortized. That means your mortgage payments are front-loaded with interest. So paying extra early saves you way more interest over time. And on top of that, you can't compare this to investing because paying down the mortgage has a guaranteed return. Investing in the market does not have a guaranteed return, especially in the short term.

And that means the faster you pay down your house, the less money you're giving to the bank and the sooner that home is 100% yours. And guess what? Once your house is paid off, you can then invest the equivalent of that mortgage payment to build some serious wealth. So TLDR, pay off the dang house, you cotton-headed ninny muggin'.

cotton-headed ninny muggins. All this to say, while there's no such thing as good debt, the one debt I won't yell at you for is a 15-year fixed rate mortgage. Here's why. Remember, if you're following this channel, the goal is to get out of debt as soon as possible and stay out of debt for the rest of your life. And a 15-year fixed rate mortgage lets you own your property in half the time of a 30-year while potentially saving you six figures in interest. And guess what? Worst case, if you don't pay anything extra in 15 years, you don't have a house payment.

which will lead you to a more peaceful path to wealth building and retirement. So the main thing to remember here is that whether good debt, bad debt, I think all debt is bad and all debt equals risk and more risk equals less peace, which is hard to represent on a spreadsheet. You can't mathematically account for the freedom and peace that comes from having all the margin and options in your life instead of debt.

For example, take the golden handcuffs of this low-interest mortgage. This has people thinking, well, I can't move because then I'll lose this sweet low-interest mortgage. So I'm going to stay in my house even though I don't want to. But when you've got a paid-for house, you have options. You can move wherever you want and probably pay cash for the next house. So if you've been listening to the people saying, the key to being financially successful is leveraging good debt, don't listen to them.

Trust me, I've fallen for those lies and I've been deep in debt myself. I know it can feel like you're stuck. So if you want to get out of the cycle, you want to get out of debt once and for all, watch this next video about how to get rid of your debt as fast as possible or click the link in the description below. Thanks for watching. We'll see you next time.