80% of Spaniards do not know how to recognize between good and bad debt

63% of young people have an active training in financial education, according to a survey by the international finance training center, Alfio Bardolla Training Group.

According to Alfio Bardolla, founder of the academy, “There is a growing trend among an increasingly important number of young people who are trained between 18 and 20 years in order to acquire knowledge to be able to invest in a way that they can obtain in the long term levers to earn money in addition to the exercise itself professional. Young people with clear ideas who see in investments a plan for the future to achieve a return ”.

In the last year, interest in financial training has experienced a 150% increase compared to before the pandemic, but in this growth, young people between 18 and 25 years old who are interested in investments focused on financial freedom have an increasing weight.

One of the current trends to achieve this financial freedom is oriented to the concept of good debt and bad debt. Alfio Bardolla explains, Not all debt has to be bad. For example, going into debt to pay for a vacation, buy a car or pay for the whims is what we call bad debt since it does not provide any economic benefit. On the other hand, good debt is one that does carry this benefit. For example, the acquisition of a home entails getting into debt with a mortgage, however, it can be rented or sold and generating medium-term benefits ».

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What is good and bad debt

The good debt is one that when borrowing money an investment is made or goods are acquired with the aim of get a return, a flow of money into your pocket. For example, if you buy a house for an amount of 500 euros per month and rent it for 800 euros per month, then you are obtaining 300 euros of benefits each month.

The bad debt on the contrary, they are those that are acquired when buy something in installments because it cannot be paid in cash and it does not generate any kind of profit. For example a mortgage for a house that does not generate profit, or for a game console, or for a car. It is used to buy liabilities that do not generate any type of profitability.

One way to detect bad debt is one that is generally associated with a credit card. Either by consumption or by service. Anything that cannot be paid in cash is generally bad debt.

Young people increasingly focus on good debt

According to the survey carried out by Alfio Bardolla Training Group, 87% of young people who attend financial training courses seek to achieve financial freedom and have in mind the purchase of a home in less than 12 months.

“You don’t have to think about big houses to move in and live in it. You can start with a small house with 1 or 2 bedrooms in urban centers with a demand for rent. A low and affordable mortgage to later rent or even reform and sell »explains the financial expert.

The right age to get into the concept of investing in good debt is between 18 and 35 years old. Although you can always start with this investment concept, having fewer family responsibilities, young people are the ones who can have the most facilities.

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