The FI Mastery Podcast

Is Your Credit a Superpower or Kryptonite?

April 06, 2023 Peter Donisanu
The FI Mastery Podcast
Is Your Credit a Superpower or Kryptonite?
Show Notes

Is credit a good thing or bad thing?

Well, it all depends on your perspective.

When used correctly, credit can supercharge your life and help you level up financially in a shorter time than you would have if you relied on savings alone. That's why Dale Carnegie, in his book, "The Gospel of Wealth," wrote that debt could be a powerful force for good if used productively.

Now, the trouble with debt is that, just like any other financial tool out there, it has been misused by lenders and borrowers alike, leading its use to be largely villainized by society. Make no mistake, in the wrong applications, debt can be a form of bondage. That's why in some cultures, its use is forbidden and why some individuals have mortgage payoff parties instead of retirement savings celebrations.

Make no mistake, however, when used prudently, credit can boost your earnings ability, enable you to acquire appreciable or income-producing assets, and help keep you from going broke when life throws you a curveball bigger than your savings account.

Even so, a Scottish historian and author, Niall Ferguson, wrote, "credit is like a looking glass. Once cracked, it can never be the same again, and the more we use it, the more fragile it becomes…"

Indeed, these perspectives from Carnegie and Ferguson show how on the one hand, the wise use of credit can dramatically enhance your current financial situation. On the other hand, debt can leave your finances in a precarious position when not managed properly.

Certainly, much has been written about the trouble with credit and how too much debt can be a trap. Before we discuss the drawbacks of credit, let's take a look at why you would want to use debt to lever up your current financial situation.

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