by Elizabeth S.
Debt isn’t ideal, but you can certainly make the most of it. There are a lot of ways to use debt to your advantage.
Acquire Property
Easily the most strategic way to use debt to your advantage. Holding on to property for ten or more years is almost a sure-fire way to make some money. A mortgage is one of the kinds of debt most people think of as “good debt” because, managed responsibly, it makes you money. Equity in the home can build quickly, but even when it’s a slower market, you’re almost always going to profit if you hold on for a long time. Also, interest on a mortgage is usually tax deductible.
Start Your Own Company
With the internet and the rise of e-commerce, working for yourself has never been more accessible. You might want a business loan to purchase equipment, product inventory, or to hire staff. There is a lot of risk here, but if you have a niche talent or market opportunity, it could pay off, big time. Interest here might be tax-deductible as well. Depending on your state or province, there might be additional relief through government programs to help small businesses, minimizing the risk a bit.
Go Back to School
Student debt isn’t always the wisest idea. For example, if you’re stuck in a low-wage job and looking to increase your income, a four year philosophy degree might not be the best idea. But there are a lot of programs out there that can have a huge salary increase for minimal investment! A student loan can be a responsible way to use debt to your advantage. Some examples are:
- Project Management Professional (PMP): this can cost anywhere from $1000-$3000ish and can be done in a couple of months. Glassdoor says Project Managers average around 82k in my area, and ZipRecruiter says they make around $125k in New York City. Of course, this won’t help if you don’t have a bit of business experience to begin with.
- Scrum Master Certification: this cert costs about $1000-3000 as well, and can earn you over $100k. A bit of tech background is needed with this one. If you’re a low level data analyst or tech support person, this can be a huge leap.
- Graduate certificate: There are a number of programs available for people with degrees that give certifications in specific areas. These can really boost income! Your local colleges are a great place to start looking, but many of these are also done online, in your own time.
Improve Your Credit Rating
I mentioned that at one point, my credit rating was in the low 500s and I had all R9 scores. I got a low-limit credit card with Capital One and slowly began to improve my credit. A friend of mine did the same with a car loan, but it cost her a lot more (her interest rate was 9% – yikes!). This can be an expensive way to build credit, and it’s risky, too. If you have bad habits with debt, using debt to improve your credit rating is not for you. Wait until you demonstrate some responsibility.
Paying off all your bills in full doesn’t give you great credit. It might actually mean that you have no credit rating at all. There are some credit cards with 0% interest rates, and those can be great for using debt to your own advantage!
Elizabeth is a single woman in her early 30s, working as a manager at a software company and living in the most expensive city in Canada. She hopes to blog about her journey to eliminate debt and build savings for home ownership someday. Whenever she has taken two financial steps forward, she’s always taken a step back with a bad credit card purchase (we’re looking at you, unnecessary iPhone of May 2019). Elizabeth lives alone with her fur kids, a dog and cat, and when she’s not in front of the computer, she enjoys running, camping, reading, and baseball.
Hey !
Unfortunately in Canada mortgage interest is not tax deductible. When i read that I went on a bit of a hunt as we have been home owners for six years and I was shocked if we would have missed this. But its only in the USA.
I would caution that there is really no sure thing. Plenty of people have lost money in real estate before, for instance. While it’s true that in recent history real estate has done well especially over long terms, that may not be true in the future. Furthermore, folks who are taking on debt to invest in real estate are going to be the most vulnerable to the risks, as they will often not have the long term financial stability to ride out dips in the market. (Same is true in the stock market).
So do your homework, and figure out exactly what your tolerance of risk is, always have a Plan B to avoid irrecoverable catastrophe, and proceed accordingly…
I’m sorry. When did this stop being a “get out of debt” blog and start being a “debt is fine” blog??
This is getting seriously hopeless. Is anyone actually interested in getting out of debt anymore???
http://planetdebtfree.blogspot.com/ – check her out! She is actively working and paying down debt and has returned to school. Also, I pick up pennies – she does a lot of spending recaps and stuff.
I love I Pick Up Pennies!
Hey Malady,
We write about personal financial topics here, and we are also asked to write about finance generally, sometimes on topics that don’t even apply to us as individuals. I want to get to a place of zero debt, including no mortgage, personally.
I just want to add, some debt in life is going to be necessary – if you choose the route of home ownership and higher education beyond a certain point, and Elizabeth is definitely making strides in tackling her debt!
I hold a PMP and teach the prep course. Mind that it requires 36 months and about 4500 hours (depending on level of education) of project management experience to qualify to sit for the exam. The CSM is a 2-day class and a test that requires no such experience beforehand.
That’s a good point. I had that experience going into the training, but for others, it doesn’t make sense to pursue that education.