Debt is a common part of financial life, but not all debt is created equal. Understanding the difference between good debt and bad debt is crucial for financial health. 

Good debt is money borrowed for something that will grow in value or generate income over time. It’s an investment in your future. Here are some examples:

• Home loan: Buying a house with a mortgage. Over time, the value of the property is likely to increase, and you build equity. 
• Student loan: Borrowing money to pay for university or vocational training. Education can increase your earning potential, making it easier to pay off the loan and improve your financial situation.

Bad debt is money borrowed for things that lose value and don’t generate income. This type of debt can hurt your financial health. Here are some examples:

• Credit card: Using a credit card to buy clothes, electronics, or dining out. These items don’t increase in value, and high-interest rates can make it hard to pay off the debt.
• Car loan: Financing a new car. Cars depreciate quickly, meaning they lose value over time. If you borrow too much, you might end up owing more than the car is worth.

At RIVAL Wealth, we’re here to help you navigate these decisions and achieve your financial goals.

This information is of a general nature and is not intended as personalised financial advice. RIVAL Wealth is a Financial Advice Provider (FAP) licenced by the Financial Markets Authority to provide financial advice. Our disclosure document is located at rivalwealth.co.nz or a written copy is available on request