I thought I would start my first post of the 2019 year about a topic that has many individuals questioning the notion of its impact on society.

Debt? – Debt in society at a preliminary level has been labeled as “bad” – The idea being the less debt you take on the better. I am certainly not for taking more or less debt than you can handle but I thought I would introduce what I have labeled- “Controlled Debt”

Controlled Debt:

What I am referring to as controlled debt can be broken down into what I define as three categories.

1) Invesment Debt:

– If you have to buy a car for example and you have to purchase it for $30,000. If are getting a 2% loan for 36 months and your investment advisor generally provides you around 3-4% conservatively per year- Now does it make sense not to take on the debt? – Sometimes there are ways to even deduct  interest payments for tax purposes (I’ll let my friends in tax handle that)

2) Credit Debt:

Credit Debt for lack of a better term is what I like to call when debt can be used to showcase future potential. I mean taking on debt and consistently paying it back is a great way to build/maintain a good credit score. Banks will see your ability to pay back loans as a very good thing. This will help you when negotiating for a mortgage, future loans interest payments and perhaps MER fees (investment fees). The less of a risk you show you are to a bank the more negotiating power you have.

3) Strategic Operations:

Strategic operations is what I refer to when investors want to hedge or diversify their portfolio. Taking on debt limits your exposure to all cash financed deals and can be used for leverage purposes. I’ll let my friends in Corporate Advisory tackle more of this.

I hope that through this article I have opened your eyes to the possibility of Debt and it’s uses.

For clarity I have to point out that I am not an expertise on debt and don’t want my words to be taken out of context but hopefully this has provided you some insight.

Debt? – Good? Or Bad? – I leave that up to you.