Is there such a thing as ‘good debt’?

It may take a bit of effort to dull the roar of propaganda that threatens to drive the average UK adult insane.  However, the effort is worth it.  Like Moses in the wilderness, if you can ignore the loud blast of doom from the IVA companies, the rumblings of the financial industry, the roar of the housing industry, then you might just hear a still soft voice that is trying to tell you how to get rich.

It is the best kept secret in the financial industry. You can become rich. 

The banks don’t want you to hear that voice.  They only profit as long as they can keep you in debt. The Bank of England doesn’t want you to learn how to become wealthy.  They need you to continue borrowing and paying interest. 

There are two types of debt.  If the end of the loan period arrives and you have nothing to show for it, then it is bad debt.  Good debt is something that increases your wealth.  Borrowing money to increase wealth is an old practice, and one that can be financially sound – as long as you follow a few rules.

Borrowing to build wealth is seen most often when the housing market is hot.  However, many consumers try to build wealth without learning the ‘art’ of building wealth.  They buy a home and then hope it will make them rich, which never happens.

Instead, you want to watch the market.  Try and speculate on where the next boom will hit. Of course, most people try to do this without expert advice – and fail. 

Investing in a foreign market has its advantages. UK investors who invested in Spain 10 years ago are laughing at the rest of us.  Some foreign markets are so lucrative that a growing number of UK citizens rent in the UK and own elsewhere.

Investing can earn money, but the best advice is to avoid the stock market and the small business routes.  These high-risk ventures need to be nurtured for years before it is possible to measure whether they will build wealth or not.

One of the best ways to build wealth is to avoid debt.  The second best secret is that most people will spend a quarter of a million, to a half a million, in loan interest over their live times.   If they saved this money, it would generate a comfortable living.

Financial education is also vital.  The government is holding millions of sterling pounds in unclaimed benefits for UK adults.  These programs include the government’s version of ‘rent to own’ to help people obtain affordable housing, tax rebates, assistance for people in middle/low income situations, benefits to help people in emergencies, and more.

The main problem is that most consumers never start to look for these benefits until weeks, or months, into a crisis.  Time strapped, and frustrated, they rarely find the service they need.

Another misconception most people live under is that they need to be poor or disabled to qualify for benefits.  This is not true.  It is not difficult to find programs for middle class households.

Ignorance of ‘solid financial practices’ can ruin a person’s life before they reach 21.  Hundreds of thousands of people paid thousands of dollars to obtain a degree in a field that is overfilled, or pays minimum wage.  It is shocking to try to measure the number of graduates from secretarial, or vet assistance courses, who do not realize that the education that cost the £10,000 or more will earn them minimum wage – the same wage they earned bagging groceries in secondary school.

More shocking is the number of people who pay top dollar for an education, only to find that there is no hope of anyone finding a job in their chosen field. Such is the fate of the Art’s graduate within weeks of their graduation.

This money would have served the adult more if they invested it into a blue chip stock, a house, or even a business.

Many people will never understand this concept. It is too simple.  There is no flashy campaign, no 10 step program, and no guru’s advice to follow.  But, it works.

The UK’s over 50s are living a dream life, according to FTSE 100 life and pensions company Friends Provident.

The Freetirement Generation report, by social researchers the Social Issues Research Centre (SIRC) reveals that the over 50 are enjoying Freetirement, unburdened by debts and free to choose how and when they work, or to explore new activities.

Freedom is the distinguishing characteristic of this group. When asked, 60% of respondents said that retirement gave them the freedom to do what they want with their life and more than half (52%) said that retirement gave them the opportunity to pursue a passion or hobby.

Dr Peter Marsh, author of the report at Social Issues Research Centre, said:

"The Freetirement Generation is in a unique position, having lived through a period of relative economic prosperity and booming house prices which mean it now has money to spare.

"Baby boomers are an important economic force. According to some estimates the over-50 population now command approximately 80% of the UK’s wealth."

These people were part of the invest and work generation, not the debt generation.  I am not saying that either group is better than the other. I am just saying that the next time you need financial advice, you should emulate the group that has what you want. The over 50 generation obviously knows how to turn a loan into wealth.