Buying a home — AKA creating a massive list of homes you're interested in, going to open houses, clicking through virtual Zillow tours, narrowing it down to two homes, and then losing to all cash offers that were over asking price.

That's the process my wife and I went through last year. We’re all fighting over these homes for the right to pay a bank 3%+ interest on a massive debt. Why? For starters, everyone needs a place to live. Home demand soared during the pandemic as we quarantined in our small apartments and cheap interest rates fueled the increase even further.

We're not going to talk about homes in this post, but rather debt. Specifically, we'll take a look at tech debt and compare it to other types of more familiar debt.

We decided to build after getting outbid so many times.

We decided to build after getting outbid so many times.

Going against my instincts

Debt generally feels bad. When we signed our names on the dotted line agreeing to pay back a massive amount of money over the next 30 years I cringed.

My instincts are to avoid debt at all costs. But our instincts aren’t always right.

I'm realizing the same thing while transitioning my side projects to be more business, less project. This means getting out of my developer mindset and into my entrepreneur mindset, which can be really tough.

I tweeted a list of things that were hardest for me, and a software engineer replied to my first bullet, "tech debt is good".

https://twitter.com/DBredvick/status/1383822225871052808

https://twitter.com/rodrigoehlers/status/1383890946387955715

I think this point is worth expanding on, as my instinct is to side with Rodrigo here.

Just like regular debt, tech debt feels bad. But as I mentioned earlier, not all debt is created equal.

There are two categories of debt:

  1. Good debt
  2. Bad debt

Good debt can help you, bad debt generally hurts you. This article from Investopedia titled Good Debt vs. Bad Debt talks about some of the nuances, but their summary is perfect for this discussion:

<aside> 💡 Good debt has the potential to increase your net worth or enhance your life in an important way. Bad debt involves borrowing money to purchase rapidly depreciating assets or only for the purpose of consumption. Determining whether a debt is good or bad sometimes depends on an individual's financial situation, including how much they can afford to lose. — Good Debt vs. Bad Debt

</aside>

So how do we decide if something is "good debt"? Well it's a little tricky. Let's look into a mortgage as an example.

Is a mortgage good debt?