The argument that "no debt is good debt" centers on the premise that all debt, regardless of its purpose (e.g., mortgages, student loans), constitutes a financial risk and a burden on future income. This perspective highlights that debt consumes future cash flow, requires interest payments, and can lead to financial disaster if payments cannot be made.
As long as the world is uncertain, there is no such thing as good debt or bad debt. There is only good risk management and bad risk management. It's a crucial concept to understand as the US continues to add to its public debt, which has tripled in the last two decades to almost $36 trillion.
Examples of good debt
Student loans are probably the most common example of good debt, given the correlation between a college degree and a higher earning potential throughout your career. Home mortgage. Most people can't pay cash for a house. However, even if you could, there are benefits to having a mortgage.
No monthly debt payments reduces cash-flow pressure and anxiety tied to creditors. Greater flexibility to change jobs, move, retire early, or take sabbaticals without repayment constraints. Money that would go to interest can be redirected to emergency savings, retirement accounts, investments, or goals.
It's true that the word “debt” has negative connotations, but most financial experts agree that certain kinds of debt can be healthy. While any debt has the potential to become bad, debt is considered “good” when it is taken on with the likelihood you will increase your income over time and overall net worth.
A low percentage means that lenders, especially mortgage companies, will look on you more favourably, as you spend less on servicing debt and have more money available to cover any larger loans that you take out. Anything between 0% and 39%, which ranges from very low to acceptable risk, should be seen as a good DTI.
No More Than Seven Times in a Seven-Day Period
Under the 7-in-7 Rule, debt collectors are restricted to contacting a consumer no more than seven times within any seven days. This rule applies to all communication methods, whether phone calls, emails, text messages, or other forms of contact.
Other measures—including net worth, retirement savings, living without debt, and financial flexibility—are not directly related to income. A high-income person with a lot of credit card debt may not be as rich as a debt-free person with a modest income.
But to them, debt is a tool, not a burden. Borrowing at a low interest rate while investing that money into higher-return assets means their capital keeps working instead of sitting still. That's why billionaires don't fear debt the way most people do.
There is no independent country that is completely debt-free. Having national debt is considered normal in modern economic systems. The country with the highest national debt is Japan. The United States is not a debt-free country.
Federal Reserve data shows that about 23% of Americans have no debt.
“More financially sophisticated individuals use debt to acquire or retain assets: stocks, real estate, businesses, etc.,” Reed said. “Debt is a tool for liquidity and tax deferral, which allows them to grow wealth.”
The 11-word phrase often cited to stop debt collectors is "Please cease and desist all calls and contact with me, immediately," which leverages your rights under the Fair Debt Collection Practices Act (FDCPA) to halt most communication, though it must be sent in writing via certified mail to be legally binding, and collectors can still notify you of lawsuits.
Most debts fall off your credit report after seven years of nonpayment. This can be helpful since negative credit report entries can hurt your credit score. But typically, people remain liable for debts in their name even if those debts don't appear on their credit report.
Of all generations, Gen Z has the highest average personal debt of $94,102, according to research from Newsweek. Although approximately 32% of Gen Zers have no debt, 43% owe up to $100,000. In comparison, their older generational cohorts have average debts of: Millennials: $59,181.
Aim to save twice your annual income by age 35, approximately $130,000 for average earners. Prioritize eliminating high-interest debt like credit cards to free funds for investment. Contribute aggressively to retirement plans, aiming for 15-20% of pre-tax income.
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
A household earning $70,000 — about $10,000 below the median U.S. salary — could comfortably afford to spend about $257,000 on a house, assuming they put 20% down on a 30-year mortgage with a 6.5% rate.