Debt: Short-Term Versus Long-Term

A few months ago, I saved up to buy a new phone, but my friend got the same one instantly on a credit card. At first, I envied her, but when she struggled with high-interest payments months later, I realized the difference between smart spending and risky debt.

Debt itself isn’t bad—it’s how you use it that matters. Good debt helps build wealth. Taking out an education loan can boost future income, a home loan builds property value, and business loans fund growth. Even investments can be a form of debt if they help grow assets over time.

On the other hand, bad debt drains finances. Credit cards with high interest, payday loans that trap borrowers, and luxury purchases that lose value quickly all create financial strain. Unnecessary loans, taken for non-essential spending, can lead to long-term struggles.

The key difference between good and bad debt is simple: Good debt helps create wealth, while bad debt leads to financial stress. Good debt usually comes with lower interest rates and results in assets, while bad debt is costly and turns into liabilities.

Looking back, I’m glad I waited to buy my phone instead of relying on debt that wouldn’t benefit me in the long run. The lesson is clear—use debt wisely to build a stronger financial future, and avoid borrowing for things that won’t pay off in the end.