Sun Jul 28 2024, by Tyler Gardner

The Key Difference Between Middle Class and Upper Class: Understanding Debt

Here is the number one thing that separates the middle class from the upper class. I’m Tyler, a former financial advisor and portfolio manager, and I create financial content for free to help you understand your financial choices.

1. Middle Class Attitudes Toward Debt

The middle class has been taught to avoid debt at all costs. They focus on getting a job, paying off debt, and living paycheck to paycheck just to keep their heads above water.

2. Upper Class Understanding of Debt

In contrast, the upper class has been taught to understand the difference between good debt and bad debt. Good debt buys appreciating assets that generate cash flow or increase your net worth, such as real estate, stocks, and education. This kind of debt typically carries low interest rates, and that interest can be deductible if it’s for education or for your mortgage.

3. Identifying Bad Debt

On the other hand, bad debt involves spending money on depreciating assets that do not generate cash flow or increase your net worth, such as credit card debt, auto loans, and consumer electronics.

Conclusion

So, next time you hear someone tell you to just stay out of debt, you might want to ask them what type of debt they’re talking about. If any of this information is helpful, please like and follow, and I’ll keep sharing insights to help you get one step closer to where you need to be.

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