Most of us grow up with the same money mantra drilled into our heads: debt is bad. Like, hide-your-credit-card-statements-in-the-junk-drawer bad. And while that kind of thinking might’ve made sense for your grandparents (who also bought homes for less than the price of your last vacation), modern financial life is a bit more nuanced.
The truth? Debt isn’t automatically the villain in your financial story. Sometimes, it's the supporting character that nudges you into your next chapter—grad school, a business launch, your first home, or even building a decent credit score. The trick is knowing which debt is beneficial, which is detrimental, and how to distinguish between them without requiring a finance degree.
This isn’t about encouraging overspending or pretending loans are free money. But it is about reframing how we think about debt—so that instead of fearing it, you learn to use it (smartly) as a tool.
Let’s start by clearing the air. Debt isn’t inherently good or bad—it’s a neutral tool. The outcome depends on how you use it.
Good debt is usually:
Think: student loans for a high-paying field, a mortgage on a home in a growing market, or a business loan with a clear ROI.
Bad debt, on the other hand:
This is your revolving credit card debt, payday loans, or that store financing deal you forgot to read the fine print on.
On average, people with unpaid credit card balances carried $7,321 in debt during the first quarter of 2025, according to LendingTree. That’s up from $6,921 in early 2024, and it includes both regular credit cards and retail store cards.
Here’s a twist: the thing that helps you avoid debt trouble later… often starts with taking on some debt now.
Your credit score is built on your credit history. If you’ve never borrowed, you may find yourself stuck with a score in the mid-600s—not because you did anything wrong, but because the system doesn’t know you yet. It's like showing up to a job interview with a blank resume.
Having a mix of accounts (like a low-interest credit card, student loan, or auto loan), used responsibly, can boost your score significantly over time. That, in turn, unlocks lower insurance premiums, better apartment rentals, and cheaper mortgage rates.
Student loans often get a bad rap—and in some cases, it’s justified. But education debt isn’t evil if it’s taken out with a plan.
Let’s say you’re considering a $20,000 graduate program that qualifies you for a job paying $25,000 more per year. Even after taxes, that could mean the loan pays for itself within two years, and everything after that is pure financial upside.
The same goes for skills-based training, certifications, or licensing that opens doors to higher earnings or new careers. The ROI isn’t instant, but it can be massive.
Buying a home is one of the few debt moves that can genuinely build long-term wealth. Unlike rent (which disappears the minute you pay it), a mortgage gradually turns into equity.
Not every market is ideal, and not everyone should own a home, but in the right conditions, your monthly payment is essentially a long-term savings plan. Many homeowners find themselves with hundreds of thousands in equity after 10-15 years, especially if they bought in an up-and-coming neighborhood.
And, of course, mortgage interest rates are typically far lower than those of consumer debt, making it one of the “cheapest” ways to borrow.
Sometimes, it's smarter to borrow—even when you have the money—so you don’t drain your emergency fund.
Let’s say your car finally dies and a new one costs $10,000. If you pay cash, you’re suddenly broke if a medical bill hits next month. But if you finance it at a low interest rate (say, 3.5%) and keep your savings intact, you’ve got a buffer. That’s peace of mind worth the small cost of borrowing.
The key? Only take this route if you’re disciplined enough to actually keep your savings untouched.
Here’s something most people forget: every major business you admire has taken on debt to grow.
From Apple to your neighborhood bakery, entrepreneurs regularly take out loans, lines of credit, or financing to expand operations, buy inventory, or hire help. They do this not because they’re struggling—but because they understand leverage.
Personal finance has taught us to fear debt, but business finance teaches you to see debt as a growth partner. So if you’ve ever thought about starting a side hustle, investing in rental property, or freelancing full-time, some structured debt might not be a setback—it might be a stepping stone.
If you're self-employed or a gig worker, a business credit card with a 0% intro APR can help you manage cash flow during lean seasons—just make sure you have a payoff plan before the promo expires.
Got high-interest credit card debt? You don’t always have to just chip away at it painfully. A balance transfer to a card offering 0% APR for 12-21 months can save you hundreds (or thousands) in interest if you create a strict repayment plan.
The trick here is to treat that window like a ticking clock—divide the balance by the months left, and do not treat it like free money. Also, avoid racking up new charges on the original card.
This is one of the few legal financial hacks that really works—if you don’t fall back into old habits.
Here’s the thing no one tells you: managing a little bit of debt well is one of the fastest ways to improve your overall financial skills.
Paying bills on time, tracking balances, resisting unnecessary purchases—it all builds muscle memory. And that same discipline translates to other areas: saving, budgeting, investing.
You don’t need to carry $50,000 in student loans to learn this. Even managing a $300 secured credit card responsibly can build the habits you’ll use for life.
Of course, not all debt is helpful—even if the marketing makes it sound that way.
Here’s when to skip it:
If you’re borrowing just to survive, pause. Reevaluate. Talk to a financial counselor or nonprofit credit organization first.
If you’re ready to rethink debt, here’s how to do it without the panic spiral:
Before saying yes to new debt, write down how it will impact you in 3 months, 6 months, and 1 year. If it still makes sense, proceed. If not, pause and explore other options.
Let’s be real—debt has been painted as a dirty word for too long. But it doesn’t have to be something that defines you negatively. When used strategically, a little debt can be a bridge, not a burden.
It can help you get educated, get started, or get free from living paycheck to paycheck. And learning how to manage it without shame? That’s one of the most empowering money skills out there.
So no, debt isn’t always bad. It’s just a tool. And like any tool, it works best in steady, informed hands.
