Ep. 24 Can Debt Actually Make You Rich?

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Can debt be a wealth-building tool—or is it always a trap? In this episode, Jim Leboeuf breaks down good debt vs. bad debt in plain English: when borrowing destroys your cash flow (liability/consumer debt) and when it can build net worth (asset/cash-flowing debt like rentals or a profitable business). We also cover gray areas (primary homes, student loans, car notes), credit-building tools (secured cards & credit-builder loans), and the classic dilemma: pay off debt or invest?

If you’re living paycheck-to-paycheck, this is your roadmap to stop the bleed, kill high-interest balances, and use debt intentionally—only when it puts money back in your pocket.

What you’ll learn
 • The simple test to label any debt: asset debt vs liability debt
 • Real-world examples: rentals, small business loans, Turo/Uber, primary residences
 • When to use secured cards/credit-builder loans to repair your score
 • Why consolidations fail without behavior change (and how to fix that)
 • Pay-off vs. invest: how to compare interest rates to expected returns
 • A step-by-step action plan: budget → list debts → choose what to pay → automate → review

If this helped, subscribe, leave a review, and share it with a friend who’s wrestling with debt. Got questions or a hot take? Drop a comment—we might feature it in a future episode.

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Transcript

Jim 0:31

Can debt actually make you rich? What a crazy question and concept to think about. Welcome to the Net Wealth Nest podcast. I'm your host, Jim Lobe. Thanks again for joining as we help you build financial stability your life, and work your way out of the paycheck to paycheck cycle. And of course, we want you to grow your net wealth. that is a very unique question, And the answer actually is, it depends. There are a couple types of debt, and that's what most people don't talk about. Many people label debt automatically as bad, and that is not always the case. Now we'll start off with what the different areas of debt are. And the first one we'll start off with is what I would consider bad debt. It's liability debt and that's debt you're using to buy consumable items. so if you're using your credit card to buy clothing or things off at Amazon or. You're going out to eat and putting that on a credit card. All of those consumable type, products are going to be liability debt and are not going to be, something that can help you actually grow your wealth. other things that would be considered, liability debt, things like payday loans, any type of store card the buy now pay later loans, or even like automobile loans, as those items will gradually decrease in value while you're paying off the vehicle and sometimes in the amount where the item that you bought actually is decreased to less than what you might owe on it. So let's talk a little bit about asset debt, and that's a little bit different. Asset debt is something that is creating value And best case scenario is actually putting money back into your pocket. The best example I have for this is real estate. So if you go and you buy, let's say a single family home and you need to take a mortgage on out on it, then you go turn around and rent it. If that rent is covering all of the mortgage, if it's covering all the repairs, the expenses, the taxes, the insurance, all the things, and you're still putting a little bit of extra money into the bank. At the end of, each month when that rent is paid, that is considered asset debt. And that is something that can grow your wealth. 'cause not only are you, having the amount that you owe paid off by somebody who's using your product, which would be the house in this case, but you're also putting a little bit of money away and the house is actually growing or should grow in value long term. So there's a lot of advantages to doing something like that, and that's where asset debt can be incredibly. Valuable and incredibly powerful to grow your wealth, but it's gotta be done the right way. There are some examples that are a little 50 50 and some people agree with and some people don't. The first one we'll start with is your own primary residence, and so many people view this as an asset. I personally like to view it as a liability because. My house and my mortgage is something that I have to pay for, so I'm working to pay that off, right? And it's not putting any money back into my pocket. Now that all being said, the house should over time, grow in value. That's historically been the trend in the United States with real estate, but in the moment it's actually taking money away from me and is why I view it as a liability. Not everybody thinks that way. That's just my personal preference. Another one that's a little controversial is student loans. if you go and get an education in something that is paying a significant amount of money because you've got that education, it's not only covering your student loans, but funding the rest of your life that could be looked at as. Asset type debt where if you didn't have that education, you might not be getting the money that you're getting because you have it. However, if you have that debt and you didn't get a job in your field, or it's not pulling the income that's covering, what you need to cover all the, student loan expenses. That would be a liability debt then. And so you can kind of see the balance of when the debt kind of switches from asset to liability is, is it paying for itself basically, or is somebody else paying it off? and is it potentially even generating cash flow? I mentioned auto loans earlier. That's another one that could work both ways. There's a new program out there called Toro where you could rent out your vehicle, and if that covers the payment of your vehicle, you could. Possibly consider that asset debt. Very similar to what a rental car company does, is they consider those assets when they buy those vehicles. It's just a, a personal type of rental situation. Same thing if you're Ubering, if it could be an asset, if it is covering, all your expenses with your vehicle and building the lifestyle you want. If you Uber a lot. So how do you determine when and where you should be using? Debt and when you shouldn't. Well, the first thing is if you're living paycheck to paycheck, you should really be looking at your liability debt. And if you have consumer debt, whether it's credit cards or loans out or any of that, you should be working to just eliminate that debt as. Fast as you possibly can because it is literally dragging you down. That debt is the debt you should stay away from at all costs. And once you get all of that debt cleared out, while you can use some of the products, maybe like your credit card to make purchases day in and day out, you should get to the point or want to get to the point where you are paying that off every single month. And so you're never accruing any type of interest, on those purchases that you've made. The other thing to keep in mind is making sure that your asset debt stays in line with where you anticipate it. Again, we'll use the rental property. If all of a sudden the rent is not able to keep up with the mortgage for whatever reason, or you're not able to rent it out, that is no longer an asset debt, that becomes a liability on you because it's. Taking money out of your pocket to hold onto that asset. And so just understanding the risk of leveraging debt appropriately is really, really important. And so it's important to understand how you personally feel about that. There are many. Influencers. There are many people, there's a lot of advertising around getting debt. You know, you can turn on the TV for just a second and you'll see a mortgage commercial for sure from one of the big lenders across the country, but also a lot of debt shame, for people who have debt. and so that's where you have to kind of know what your mindset is and where you're comfortable using debt. If it's the appropriate debt for you to use, again, if you're using debt to fund a lifestyle that is not appropriate, that's not where you want to be, and that's not how you're gonna build long-term wealth And sometimes that shame can push people into financial stagnation instead of growth. a great example of this would be somebody who. starts up a business and is slowly growing that business and they're starting to get some traction, but they're so debt adverse that they won't maybe go take out a small business loan to really add fuel to the fire they've created to expand their business and grow it. Maybe exponentially or rapidly. They're so scared of doing that even though they've got proof of concept and they've had some success with their business, they just refuse to do that, and it kind of puts a stranglehold on how they can grow. Or we see this in the real estate market as well, where some of these not willing to take out a loan on it, so they're just going to buy properties all in cash, and that means saving up money. For a long, long time. That growth can be really, really powerful if you're doing the right way and if you're not over leveraging yourself in debt. But it's really important to understand what your risk mindset is, and then it's really important that you are taking out debt only where you are building assets, not liabilities. The other place that it can make sense to take on some sort of debt is when you do it intentionally. And I specifically mean this for people who have maybe a poor credit score that are looking to build their credit score backup. These are individuals that have maybe had credit cards in the past, have defaulted on them. Or maybe have even declared bankruptcy in the past. One thing you can do is you can go and you can get maybe a very small credit builder loan, or you can get a secured credit card to help you build back your credit by making monthly on-time payments. These are usually, typically very small amounts, usually within a hundred to $500, for a loan, or a secure credit card, which is like a regular credit card, except you have to give the bank the money in advance, that secures the amount that they will lend to you. but when you do these types of products as an example. They are reported to the credit bureaus, and that helps you every month get a positive check mark and start to build back up your credit if it is low. The secure credit card, I'll go back just to explain that a little bit. Like that's something like going to a bank and getting a card where maybe they're gonna give you $150 limit. But the key is you're actually going to give the bank the $150, and that is securing that. If you don't pay off the card, they have no loss there. And then what you do is you use the card just like you normally would. It has the limit of $150. So you go and maybe you buy gas with it. At the end of the month, you pay off the card. And you just keep going. And every single month that you pay it off, they are providing a positive mark on your credit report, which will build your credit over time. The other nice thing is if you have poor credit, but you do a really good job with the secured card, over time that bank may be willing to give you a standard credit card, that you can use and give you that money back that you originally put down on your secured credit card. Again, you have to show a track record sometimes 12, 18, or 24 months of consistently paying on time and not abusing that card before they'll go down that road. But it is something that will help you build back your credit over time. Now there are some common mistakes that people do make when they're trying to figure out where their risk tolerance is. What is good debt? What is not good debt? Where should they, focus on what they're doing? And so there's a couple of tips that I'll give you that'll help you if you have low interest debt. So let's say you do have a mortgage, working to pay that off before you have an emergency fund built up is probably not the best idea. And the reason being is if all your extra cash is going to that, home loan, and especially if you have a lower interest rate of. Three or 4%. All your extra cash is go in there and you don't have something to cover. If an emergency happens, you need tires for your vehicle, your water heater or furnace goes up, you need, any of those things. If you don't have that built up, you could derail your financial situation because you don't have that emergency fund And you don't have cash to be able to access to cover that emergency fund. So that's one mistake that I see. Another mistake that's really common is consolidating your debt without changing your spending behaviors. So some people will get these, you know, 24 months or 18 months, 0% interest offer that allow balance transfers. And what they do is they take all their credit cards that they might have been struggling to pay. They put it in one balance and then they work to pay that off. But in the meantime, they're not changing the actual behavior of what got them in that situation to begin with, which is typically overspending what they make. And so they might feel like they're making progress, but then they end up in a bad situation where they're not able to pay off that amount. In inside the 18 months, which means they start paying interest and sometimes back interest depending on how the card and the transfer is set up on those dollars that are in there. And that could be super detrimental as well. So understanding, A, how that program works, and then B, really evaluating like how did I get in the situation where I'm needing to consolidate my debt and how am I not going to repeat the same process over and over. so the last one, which is a little ironic 'cause I'm talking to you about this via podcast, but letting influencers, or I guess you could say your own pride dictate your financial choices instead of the math. And here where I really, you know, anchor back to is just make sure you, if you're struggling and you have that paycheck to paycheck, or you're making late payments or any of that. Do you have a budget and are you tracking how and where your money goes? And if you are, what are you doing or what changes are you making to get yourself in a better position? if you're not tracking it. That's where I would recommend you go. before we start talking about any other debt or anything, like, you should be tracking everything, But letting the math dictate your decisions is always important. And even if that means swallowing a little bit of your pride or maybe doing something that is not necessarily uh, mainstream, might get you to the position you need to be. But again, the math is really important to do, and that always flows back to ensuring that you have your budget set up and you're tracking where your money goes. And so a couple of things to think about. As you work through your debt situation, you should list out all your debts. If you've done your budget, you've probably done this, but you should list out what those are from a balance situation, what the interest rate is, and then label them as an asset debt or a liability debt. Categorize them by their interest if it's high interest, or how fast you can pay it off, especially liability debt. and understand the order based off of the math and the mindset that's going to get you to the right place. Doing things like automating payments on that and then revisiting your budget and your plan every few months to make edits and changes as necessary is incredibly important. And so as we kind of close out the episode, what I really want you to understand is debt can either drain or build you, and there are many more ways that debt can drain you, which is why it has such a bad reputation. But there are a few ways that it can actually build your wealth long term. You just have to know what those ways are, understand how they work, and be really. Pragmatic on when you use that asset type debt to build your wealth, the other debt, all the consumable debt and the liability debt. Your goal should be to eliminate that as quickly as you possibly can. And then of course, if you need to use some intentional debt around building your credit score, go ahead and do that. and so the call out I have around that is financial freedom or even financial stability isn't always about owing nothing. It's about owning something that pays you back, and that's what I would encourage you to do. Thanks again for joining today. I hope this was helpful for you. if it is, please share, this with somebody who could use the information in the education. As always, if you haven't subscribed to our YouTube channel, please do that. Make sure every time we post a new video that you are alerted for that. If you're listening to us on your podcast player, your Apple Podcast or Spotify, please like us. Please follow us. Please leave us reviews. As always, leave us questions and comments in there that helps us create new content and things you're interested about and want to hear about. Also, we'd love to engage with our audience in those comments sections, so if you disagree with some of the things I said, I'd love to hear it. Let me know and I would be more than happy to start a dialogue with you. Uh, through those comments, if you have any experiences of things that worked out that you've done with your debt that you think will help others, please also leave those comments. Thanks again for joining today. My name's Jim. Bye, everybody.