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Debt has a bad name.

Those who use debt to buy goods that decrease in value, will find the debt becomes a burden and a harsh master. This is too much debt.

However, debt is not necessarily a bad thing. Debt, if used wisely can bring about achievements that would otherswise be impossible. For example, how many of us could live in a house if we did not initially borrow to buy the property? How could government afford to build roads, railways and national construction projects, if it did not first borrow the funds?

Those who borrowed to buy a home, found that over a length of time, the property increases in value and the level of debt reduces. Finally the debt is repaid and the home owner is left with a very valuable asset.

Similarly, a government borrows to build a dam. The people enjoy abundance of cheap electricity, irrigation, clean drinking water and the economic benefits that flow from the initial investment. People and industry move to the area supplied by the dam, providing a flow of money that is used in taxes, to repay the loan.

There are many good reasons to use debt money to invest in property and projects that increase in value.

But when the money used to invest does not bring the economic return hoped for, the debt can severely hamper or cripple a home owner or even a whole nation. Therefore, it is extremely important to know the risks and potential outcome before committing to debt.

Debt is always bad when it is used to buy things that lose value. Furniture, cars, consumer goods and household items, should always be purchased with money already in hand. Therefore saving towards these things is an essential part of avoiding debt that has the potential to become a noose around our neck. This much debt is then too much.

Learn more about this author, Miles Togo.
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