Other People's Money

If you look around the personal finance blog world, you will probably notice that most people fall in one of the two categories – those that always save up for purchases ahead of time or those that almost always leverage available credit. People in the first category are careful about their spending habits, have at least three months of living expenses stashed away in emergency savings and are in general prepared for what life throws at them (or at least working towards that goal). People in the second category usually try to gain the most possible leverage out of available credit by obtaining low interest debt and investing it in endeavors that offer better returns. If you ask the question “Should you pre-pay your mortgage?” people in the first category will likely answer “Yes, it’s a huge debt, so get rid of it as soon as possible” and people in the second category will likely answer “No way, stretch it as much as possible since the interest is low and has so many tax benefits”.

http://gradmoneymatters.com/2007/11/spending-habits-that-defy-logic.html

If you can make sense of what is said above, that's perfect, if not, the quote is just talking about the 2 kinds of people who use credit card. One of which uses it to splurge, the credit-card company's best friends, the other uses it to get loans without interest, the credit-card company's worst customers.

It leads me to what Robert Kiyosaki said. He said, "Money isn't dangerous, the investor is." He also said, "There are good debts and there are bad debts."
What is good debts and what are bad debts? Bad debts are debts that take money out from you while good debts does the opposite. Now, you may say, but don't all debts take money out from you? I beg to differ. If your debt is meant to pay for a commodity that does not repay you any monetary value, it would be considered bad debt. Let's say, what if you took a loan to purchase a house and rented it out? Or maybe relevant to this post, take a loan from the credit card, put it in a bank account to earn that small interest and return it before the interest start charging?

By charging to credit cards, you've already incurred a debt. By putting it in bank to earn some money, you've converted it to become a good debt.

If you purely insist on not having debts, be it good or bad and think all of which are bad, you would be losing out on opportunity to deal with other people's money (OPM). If you haven't already realised, the more money you have, the faster your money comes in. If you wish to start a business and you need capital, you take a loan, you've already started to use OPM. The money in the loan does not belong to you. It's the bankers'. If you insist on not using OPM, then how long would it be before you can start a business if you have to save up every cent of it?

In other words, OPM gives us leverage. Never in this world has money been so easily available. Now, we get the 5 mins loan from POSB bank. Before that was 2 hour loan approval. Year before, weeks would have to be taken before approval could be given for a loan. There thus, has never been an easier time to make use of the leverage present, OPM.