Why "Good Debt vs. Bad Debt" is a Stupid Argument

...and WTF is ROL?! (The Only Metric That Matters!)

(Explore our free $25M case study and other ways to MAXIMIZE the American Dream together!)

The Financial "Gospel" That's Costing You a Fortune

You've all heard the sermon, probably from a guy in a bad suit yelling on the radio. It’s the gospel of mainstream personal finance, and it’s a trap.

This doctrine, preached by gurus whose business models depend on selling simplicity to the masses, divides the world into two neat little boxes: "good debt" and "bad debt".

• "Good Debt" 😇: This is your mortgage or your student loans. Why? Because the gurus say they're for "appreciating assets" or "increasing your income". It's the "safe," "secure" path.

• "Bad Debt" 👹: This is the ultimate sin - the credit card. It's for "depreciating assets" like lattes or laptops. It’s a sign of impulse, a moral failure.

This advice is fine for W-2 employees who just want to manage their 401(k) and die with a paid-off house. But for an entrepreneur - a builder, a creator, a capitalist - this "good vs. bad" framework is a financial suicide pact. It's a moral judgment, not a business calculation. It’s the single worst piece of advice you can follow, because it teaches you to be a consumer, not a leverager of capital.

As entrepreneurs, we need a different map. We need the "builder brain." The first rule of a builder's brain is simple: An asset puts money in your pocket; a liability takes money out. By this definition, your house is a cash-eating liability. And those "bad" credit cards? Just ask the founders of countless disruptive companies who seed-funded their start with a "Visa Financing Round." (Airbnb, Under Armour, etc)

This leads us to the central thesis: For an entrepreneur, there is no "good debt" or "bad debt."

There is only Tool Debt.

Debt is a powerful, amoral tool - a scalpel, a chainsaw, a blowtorch. In the hands of a master, it builds an empire. In the hands of a fool, it cuts off their fingers. The debt isn't good or bad. The user is.

The "Good Debt" Myth (And How It Murders the Real American Dream)

The personal finance gurus love this one. It's the crown jewel of their "debt-free" sermons. "What's good debt?" they ask, chests puffed out. "A mortgage! Your home is an appreciating asset!"

This is the cornerstone of the old, dusty American Dream. The one where you get a job, buy a house, and spend 30 years paying it off so you can "own" it.

For an entrepreneur, this advice isn't just wrong; it's a strategic catastrophe.

Let's take a scalpel to this "appreciating asset" myth.

First, "appreciating"? Really? Tell that to... well, me in 2008. But that's not even the main point. Let's pretend your house value is going up on Zillow. So what? You can't shave off a shingle to make payroll. Your house is a deeply illiquid asset. That equity is a fantasy number on a piece of paper until you sell... and then where will you live?

Worse, it's not an asset at all. Let's use the only definition that matters: An asset puts money in your pocket. A liability takes money out.

Your house is a champion-level liability.

It eats your cash every single month. It demands a mortgage, taxes, insurance, and repairs. It demands a new water heater on a random Tuesday. It demands HOA fees. Your house doesn't buy you inventory. It doesn't pay for your next marketing campaign. It just sits there, demanding to be fed.

And this is the real problem. The gurus are selling you the wrong dream.

They're selling you the consumer's American Dream: a "debt-free home." That's a dream of consumption.

The entrepreneur's American Dream - the real one, the one that a majority of Americans now say they have - isn't about consumption. It's about creation. It's about building something from nothing. And to create, you don't need an illiquid liability that drains your bank account. You need cash. Cold, hard, deployable, liquid cash.

Tying up all your personal capital - that $50k or $100k down payment - and your primary borrowing capacity into a single, illiquid "asset" that costs you money every month isn't just a bad move. It's a strategic blunder.

You've essentially locked your best tools in a safe and thrown away the key, all in the name of "good debt."

How "Bad Debt" Can Build an Empire

So, we've established that "good debt" is often a trap that locks up your cash and murders the real American Dream.

Now, let's talk about the ultimate financial boogeyman: "Bad Debt." 👹

The Lie We're Told

This is the part of the sermon where the gurus pound the pulpit. "What's 'bad debt'?" they scream. "Credit cards! Car loans! Anything that's not a mortgage!"

Why? "Because," they warn, "you're using it to buy depreciating assets."

That laptop? It's worth less the second you open the box. Those Facebook ads? They disappear instantly. That pallet of inventory? It's just "stuff" until you sell it. Using debt for these things is, in their eyes, a moral sin - the fast-track to financial ruin.

The Entrepreneur's Reality

This is the exact moment the employee brain short-circuits. They hear "20% APR" and run for the hills, clutching their pearls.

The entrepreneur, the builder, sees a tool.

Who cares if the laptop is "depreciating"? What if that $2,000 laptop lets your new salesperson close $20,000 a month in new business?

Who cares if the ads "disappear"? What if that $5,000 ad spend has a 3-to-1 Return on Ad Spend (ROAS) and brings in $15,000 in revenue?

This isn't a moral question. It's a math problem.

The Only Math That Matters: Return on Loan (ROL)

Forget "ROI" (Return on Investment) for a second. When you're using Other People's Money (OPM), the only metric that matters is ROL: Return on Loan.

The formula is dirt simple: (Profit from Loan / Cost of Loan) = Your ROL.

Let's run a scenario. Let's say you're a true renegade and you borrow $10,000 on what the gurus would call a "horrific, life-destroying" credit card at 20% APR. To keep the math simple, let's say you hold it for a full year. Your total Cost of Loan is $2,000. It's an expensive tool, no doubt.

But you're an entrepreneur. You use that $10,000 to buy a pallet of inventory that you already know you can flip. Within 60 days, you sell it all for a total of $40,000, giving you a clean $30,000 profit.

Now, let's do the math the gurus won't:

Your ROL is ($30,000 Profit / $2,000 Cost) = 15.

That is a 15x return on the bank's money. You just used a $2,000 tool to build a $30,000 house. You turned $2,000 of their money into $28,000 of your money.

So, I'll ask you: Who gives a damn about the 20% APR?

That's not "bad debt"; that's a genius-level business transaction. The employee sees the 20% cost and panics. The entrepreneur sees the 15x return and gets rich. This is the "builder brain" in action.

The New Rules: A 3-Point Checklist for "Tool Debt"

Okay, so you're starting to see the light. You see how that "bad debt" just made you a 15x return. Your inner "builder brain" is waking up, and you're looking at your credit cards with a whole new respect.

Easy, killer.

Just because you can use debt doesn't mean you always should. Remember, debt is a powerful tool, like a scalpel. Before you start cutting, a master surgeon always runs a checklist. An amateur just wings it (and ends up on an episode of Botched).

So, before you sign on the dotted line for any loan, you must be able to answer "HELL YES" to these three questions. This is the simple, non-negotiable checklist that separates the strategic builders from the reckless gamblers.

Question 1: Does this debt have a clear, measurable, and fast Return on Loan (ROL)?

This is the big one. You're not borrowing money to "hope" or "see what happens." You're making a calculated investment. You must have a clear, conservative plan for how this money will generate more money than it costs.

• Gambling: "I'll use $20k to run some TikTok ads and hopefully get new customers."

• Building: "I'll use $20k for an ad campaign that I've already tested at a small scale. I know my ROAS is 3:1. My ROL on this loan, even at 20% APR, will be at least 8x."

If you can't do the simple math on the back of a napkin, you're not investing. You're gambling with someone else's chips.

Question 2: Does this debt buy me TIME or create SPEED?

The real, un-talked-about asset in business isn't money; it's time. As an entrepreneur, your time is the most valuable commodity you have. If you're stuck doing $20/hour tasks (like data entry or customer service), you can't do the $1,000/hour tasks (like sales, strategy, or closing deals).

• Gambling: "I'll borrow $5,000 to buy a fancy new desk chair and a giant monitor."

• Building: "I'll borrow $5,000 to hire a part-time virtual assistant for six months. This frees up 10 hours of my week, allowing me to focus on high-level sales calls that will land two new $25,000 clients."

Debt that buys back your time is almost always profitable leverage.

Question 3: Is this solving a Cash Flow problem or a Business Model problem?

This is the most important, gut-check question of all. You have to be brutally honest with yourself.

• A Business Model Problem is when your business is fundamentally broken: you have no customers, your product doesn't sell, or your profit margins are negative.

• A Cash Flow Problem is when you have a profitable business, but the timing of your money is lumpy: you have to pay for inventory 60 days before you get paid by your customers.

Debt is a TERRIBLE fix for a broken business model. It's like giving a drowning man a cannonball. It just sinks him faster.

Debt is a BRILLIANT tool for a lumpy cash flow problem. It's the bridge that gets your profitable business from "inventory paid" to "customer paid" without skipping a beat.

Before you take on any debt, look in the mirror and ask: "Am I using this to build a bridge or to dig my own grave?"

The "Genius Debt" That Breaks the Matrix

So, you've run the checklist. You've confirmed you have a strong business model, not just a cash flow problem. You've identified a clear, high-ROL opportunity to buy inventory or run ads.

You've done the math and realized that even a "bad" 20% APR loan is a smart move because it generates a 15x return. You're ready to pull the trigger.

This is where we separate the pros from the masterminds.

If using a 20% APR loan to get a 15x ROL is "Smart Debt"... what do you call using a 0% APR loan to get that same return?

We call that "Genius Debt." 🧠⚡

This is the ultimate cheat code for entrepreneurs. It's the strategy that breaks the entire "good vs. bad debt" matrix.

Let's redo the ROL math from Part 3, but with "Genius Debt."

You're a savvy builder, so you work with a pro to secure a $100,000 stack of business credit at 0% interest for 15 months. Let's say there's a one-time 5% fee to secure it (or you pay a pro to do it). Your total Cost of Loan is $5,000.

You use that $100,000 to execute the same inventory flip or ad campaign, generating that same $300,000 profit (using a 3:1 ROL from the $100k).

Now, what's your new ROL?

($300,000 Profit / $5,000 Cost) = 60.

That's a 60x return on your cost of capital. You turned $5,000 into $300,000. This is the staggering power of leverage when you remove the single biggest drag: interest.

You get all the upside of OPM (Other People's Money) with almost none of the downside. You're not just treading water against a 20% APR; you're in a speedboat with free fuel, getting a 15-month head start on your competition before the real math even begins.

This isn't theoretical. This is the ultimate tool for entrepreneurs. It's exactly what the personal finance gurus are too terrified (or just plain ignorant) to talk about, because it's a builder's strategy, not a consumer's plan. It's how you really fund the American Dream.

Conclusion: Stop Judging Your Debt and Start Using It.

So, let's look at what we've learned.

The entire "good debt vs. bad debt" argument is a trap. It's a morality play designed by financial gurus for employees - people who are taught to be consumers and savers. It’s a map that only leads you to the middle class.

As an entrepreneur, your job isn't to judge debt; your job is to use it. Debt is a tool, plain and simple. It's not "good" or "bad." It's just a lever. The only real question is whether you are smart enough to use it profitably.

The employee sees a 20% APR and panics. The entrepreneur sees a 15x ROL (Return on Loan) and builds an empire.

The employee sees a "debt-free" house as the ultimate asset. The entrepreneur sees it as a cash-eating liability that murders the real American Dream - the dream of creation, freedom, and building something from nothing.

Your job is to use every tool in the box. Stop asking if a tool is "bad." Start asking, "What is my ROL?"

The difference between an amateur and a pro is knowing which tool to use, how to use it, and when. An amateur buys a laptop with a 20% APR card and calls it "bad debt." A pro secures $150,000 at 0% APR - what we call "Genius Debt" - and calls it a Tuesday.

When you're ready to stop listening to the radio gurus and start using the sharpest, most powerful "Genius Debt" tools in the box, let's talk.

Explore our free $25M case study and other ways to MAXIMIZE the American Dream together!