Farmers in Finance – Episode 22
Most farmers don’t have a debt problem.
They have a
structure problem.
In
Episode 22 of Farmers in Finance, Rico Manazza breaks down the real difference between good debt and bad debt — and what most farmers, entrepreneurs, and business owners get wrong about leverage.
Debt isn’t automatically bad. But unstructured, unplanned debt destroys margin, creates stress, and quietly erodes everything you’ve built. The question isn’t whether you’ll use leverage. The question is whether leverage will use
you.
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📋 In This Episode
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What Bad Debt Really Is
Bad debt has one defining characteristic: it
consumes your income instead of producing it.
The most common example is the credit card. The average Canadian is carrying around $23,000 in personal debt, much of it compounding at 19% per year. That means unless whatever you bought is generating a return greater than 19%, you are actively eating your own income every single month.
But it goes deeper than interest rates.
Bad debt feeds what Rico calls
lifestyle inflation — the illusion that you have more money than you’re actually producing. High-interest loans make you feel wealthy in the short term. You borrow from your future self. And the emotions that come with that — the anxiety of the next payment, the stress of an uncertain paycheque — are where bad debt does its real damage.
As Rico puts it:
bad debt equals stress. You feel it.
The car payment you’re scrambling to cover. The loan that made perfect sense when you signed it and now controls your decisions. That’s the signal. Not that you’re irresponsible — but that the structure isn’t working for you.
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What Good Debt Really Looks Like
Good debt does the opposite. It
expands your production, generates income, appreciates in value, and has a clear path to zero.
Rico tells a story from his farming days that makes this concrete. When he started, he did everything by hand — moving water pipes across the field, building mounds manually, losing hours every day to tasks that could be mechanized. Then he drove past a neighbour’s field and saw black plastic mulch laid in perfect rows by a tractor attachment.
He researched it. The machine cost around $20,000. He went into debt to buy it.
His production went up 65%.
The cost of the equipment debt was nothing compared to what he was losing by not having it. And that’s the test for good debt:
does it produce more than it costs? If you can borrow at 6% and reinvest at 10%, you’re making 4%. The leverage is working
for you.
Good debt also has structure. A mortgage has an amortization — 25 or 30 years, with a clear end. You’re building equity the entire time. A rental property that generates even $20 in positive cash flow after expenses isn’t just breaking even — it’s paying itself off, growing in value, and not costing you a minute of stress.
That’s the difference. Good debt is something you can sleep with.
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The Producer vs. Consumer Mindset
At the core of this episode is a distinction that changes how you see every financial decision you’ll ever make.
Consumers borrow to satisfy a want. The new car. The vacation on credit. The upgrade that feels urgent right now but has no financial return. The excitement fades. The debt doesn’t.
Producers borrow to build capacity. They ask a different question before signing anything: does this debt produce more than it costs? Can I sustain it if my income drops 30%? Does it align with my system — or just my emotions right now?
Rico brings up Robert Kiyosaki’s framework: if you want the Lamborghini, get the Lamborghini. But first, acquire the asset that generates enough income to cover the payments. Want the new truck? Fine. Build the cash flow first. Then the debt serves your goal rather than becoming one.
This is the shift. From reacting to planning. From impulse to structure. From consumer to producer.
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The Hidden Debts Nobody Talks About
Not all debt shows up on a balance sheet.
Rico identifies four debts that most people are carrying — quietly, constantly — without ever naming them.
Knowledge debt. If you stop learning, you stop growing. Your income stagnates. Your options shrink. The debt you owe to your future self is the compounding cost of not investing in what you know. This show is one hour. But the difference between someone who understands leverage and someone who doesn’t plays out over decades.
Emotional debt. Most bad financial decisions aren’t made with bad math. They’re made with emotions. The car bought on excitement. The investment made out of FOMO. The loan taken because saying no felt too uncomfortable. When you spend from your emotional state instead of your strategy, you’re accumulating debt in a currency that’s hard to track but easy to feel.
Legacy debt. What are you leaving behind? Rico asks the question plainly: if you passed away today, would your family inherit assets — or liabilities? Bad debt doesn’t disappear when you do. It gets passed on. Building with legacy in mind means structuring your finances so that what you leave behind creates freedom, not burden.
Time debt. Where is your time going? Is it producing something — building a skill, an income, a relationship, a business? Or is it being spent on things that feel productive but aren’t moving anything forward? Time is the one asset that never comes back. Carrying time debt means your future self has fewer options.
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How to Stress-Test Your Debt Structure
Before you take on any debt — for any reason — Rico recommends putting it through a simple pressure test.
Question 1: Can I afford the payment right now? Not just technically, but comfortably. Is this payment within your current income in a way that leaves room to breathe?
Question 2: If my income dropped 30% tomorrow, could I still sustain this? A bad harvest. A slow season. A job loss. A health event. What happens to this debt when things go sideways? If the answer makes you uncomfortable, that’s the answer.
Question 3 (for income-producing assets): Can I afford a vacancy? If you’re financing a rental property, can it sit empty for one or two months without breaking your structure? If not, you may be undercapitalized for the risk you’re taking on.
Question 4: Does this debt produce more than it costs? This is the ultimate filter. If the debt funds something that generates income, builds equity, or creates a measurable return above the interest rate — it has a case. If it doesn’t — be honest about what you’re really buying.
Rico also introduces the Cashflow Game by Robert Kiyosaki as one of the most practical ways to build this kind of financial intuition. Two hours of gameplay teaches what years of school never covered about how money, debt, and passive income actually work together.
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The Freedom Leverage Test
At the end of the episode, Rico brings everything together into one final question:
Does this debt align with your systems — and can you sleep at night with it?
Financial freedom isn’t about being debt-free. It’s about being structured. Time freedom, money freedom, location freedom — the ability to go where you want and do what you want — all of it comes from having the right systems in place.
Debt, like money, amplifies what’s already there. Strong systems become stronger. Weak systems break. The goal isn’t to avoid leverage. It’s to use leverage in a way that builds capacity, not pressure.
Quote of the episode, from James Clear’s
Atomic Habits:
“You do not rise to the level of your goals. You fall to the level of your systems.”
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Watch the Full Episode
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Farmers in Finance – Episode 22
Good Debt vs Bad Debt (What Most Farmers Get Wrong)
👉 Watch on YouTube
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Episode Timestamps
0:00 — If Income Dropped 30% Tomorrow
2:15 — Welcome to Farmers in Finance
5:00 — Episode 21 Recap – Debt Is a Signal
9:00 — Systems vs Goals
13:00 — Debt Amplifies Your Systems
18:00 — What Is Bad Debt?
27:00 — What Is Good Debt?
37:00 — Producer vs Consumer Mindset
42:00 — Hidden Debt Explained
48:00 — Stress Testing Leverage
55:00 — The Freedom Leverage Test
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Frequently Asked Questions
Q: What is the difference between good debt and bad debt?
A: Good debt generates income, builds equity, or expands your productive capacity — like a farm mortgage, equipment that increases yield, or a rental property with positive cash flow. Bad debt funds lifestyle spending with no financial return, like high-interest credit card debt used for consumer purchases. The key filter isn’t the interest rate alone — it’s whether the debt produces more than it costs.
Q: How do I know if I can afford a new debt?
A: Run the stress test. Can you afford the payment today? Could you still sustain it if your income dropped 30%? If it’s an investment, can it sit vacant or idle for a month or two without breaking your structure? If all three answers are yes, the structure is sound. If any answer makes you hesitate, that hesitation is information.
Q: Why is the average Canadian so deep in debt?
A: The average Canadian carries roughly $23,000 in personal debt, much of it at 19% interest. A big part of the reason is emotional spending — buying from excitement, anxiety, or social pressure rather than from a plan. When financial education is missing, debt becomes reactive rather than strategic.
Q: Is it possible to use debt to build wealth as a farmer?
A: Yes — and most successful farm operations already do. Seasonal borrowing to fund planting, equipment financing that increases production, and land purchases with structured repayment are all forms of strategic leverage. The difference between wealth-building debt and wealth-destroying debt is whether there’s a clear system behind it.
Q: What are the hidden debts Rico talks about?
A: Beyond financial debt, Rico identifies four others: knowledge debt (the cost of stopping learning), emotional debt (spending driven by emotion instead of strategy), legacy debt (what you leave behind for your family — assets or liabilities), and time debt (where your time is going and whether it’s producing something meaningful). All four compound over time just like financial debt does.
Q: What is the Freedom Leverage Test?
A: A simple self-check before taking on debt: does this align with my systems, and can I sleep at night with it? Financial freedom — time, money, and location freedom — comes from structure, not from avoiding debt entirely. The test helps you distinguish between leverage that builds capacity and leverage that creates pressure.
Q: What does Robert Kiyosaki say about debt?
A: Kiyosaki draws a sharp line between debt used to acquire income-producing assets and debt used to fund lifestyle spending. In
Rich Dad Poor Dad, he argues that financially educated people use debt as a tool to build wealth — borrowing to invest in assets that generate returns above the cost of borrowing. His rule: acquire the asset first, then let the asset fund the want.
Q: How can I start getting my debt under control?
A: Start by separating your debt into two categories — producing and consuming. Prioritize paying off high-interest consumer debt as fast as possible; that compounding is working against you every day. Then, before taking on any new debt, run it through the four stress-test questions. And if you want a structured conversation about your specific situation, book a free call — Rico and Gaurav only get paid if they help you.
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Get Involved
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