What you can read in Grant Cardone’s Credit Advice
Unlike my financial partner Dave Ramsey, Grant Cardone subscribes to the idea that some debt is good. Cardone used credit to build his real estate business, and he often talks about credit card usage.
One of Cardone’s arguments for using good debt is that Fortune 500 companies use large amounts of debt all the time to continue building their businesses. While your finances may not match the balance sheets of those big companies, there are lessons to be learned from Cardone’s approach.
‘Good’ credit can help you improve your finances
Financial professionals often consider debt that can help you build wealth over the long term as “good debt.” Examples are personal loans, which allow you to build home equity, and business loans that can set you up to create a profitable business in the future. Student loans are also considered “good,” as they allow you to pursue an education that can give you higher earning potential.
If you can pay off your “good” credit loan responsibly and according to the terms of your agreement, that loan can improve your finances.
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‘Bad’ credit can be devastating
“Bad” credit, on the other hand, can be a hindrance to your finances. This is generally considered a high-interest loan for goods or services that will not increase in value over time. Taking out a loan to go on vacation, or racking up credit card debt from a shopping spree that you can’t pay off can be in the “bad” debt category.
To be clear, Cardone does use credit cards, which can offer significant savings on groceries, gas, travel and other items through their rewards programs. But he says he pays off his credit card at the end of every month so he never has to pay interest on it.
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How to avoid ‘bad’ credit
The key to not accumulating bad debt is to avoid living beyond your means. Setting a budget and following it can help ensure that you are able to pay off your credit card balance each month while saving for your short-term and long-term financial goals.
It’s also important to have an emergency fund that can cover three to six months of expenses in case the unexpected happens, such as needing to pay for an expensive car repair.
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