It’s almost impossible to get through life without any form of debt. Student loan debt, mortgages, car loan, credit card loans, you name it. Unless you’re born rich, debt is going to be an important part of your life. Generally, debt is often seen as bad and something to be avoided. Not many people know that there are other kinds of debt which are actually “good”.
The Good Debt
What is good debt? Good debt is debt that helps you generate income. This is debt that increases your net worth or helps you invest to grow your money. Here are examples of good debt:
Better education = better paying jobs.
Starting your own business can significantly increase your incomes in the future.
The Bad Debt
Now that you know what good debt is, let’s take a look at bad debt. What it is and why you should avoid it. Bad debt is basically any debt that lowers your net worth and doesn’t have any guarantee that your investment will grow in the future. Here are a few examples of bad debt:
Credit card debt can seriously jeopardize your finances.
Cars lose value over time and they can put your finances at risk.
Helpful Advice To Avoid Bad Debt
Avoiding bad debt is a good step towards smart money management.
Here are a few things you can do to avoid bad debt:
- 1Don’t buy things just because they’re on sale. Only buy what you need.
- 2Learn to say no sometimes. Don’t say you’ll do it if you can’t afford it.
- 3Make a shopping list whenever you go to the grocery store.
- 4Always bring cash so you don’t get tempted to use your credit.
- 5Build an emergency fund as soon as you start earning money!
- 6Think twice about purchasing things online.