There is no good debt


You have probably heard of different types of debt that a person might accrue through their life, and one of the terms that often gets thrown around is “good debt”. In fact, it is quite common that you hear people mention good debt, especially after they have made a purchase – often a purchase that they did not actually need, but rather wanted. The truth of the matter is that there is no such thing as good debt, no matter what anyone tells you. Those who use the term and believe in it are either mistaken or trying to find ways that they can justify the amount that they have spent.

What Do People Think Is Good Debt?

When you hear this term thrown around, it is often brought up when people are talking about the mortgage for their house or the amount that they are in debt because of their student loans. They know that doing things like buying property and going to college can provide them with certain advantages in life. They are investing in their future, and there is some truth in that. However, that certainly does not mean that the money owed is good debt.

If you believe that this is good debt, take a moment to think about not only your own life, but the lives of many people over the course of the last few decades. Many people are suffering from massive student loan debt into their 30s and 40s. This reduces the amount that they are able to save, causing them to need to work for longer to make up for the difference. Consider the number of people who were foreclosed on over the past decade and who lost their homes because of the recession and the fall of the real estate market. They are still in debt, but they do not have anything to show for it.

Also, consider the fact that some of the money that might be part of a student loan goes to things other than education. When spending on luxury items or frivolous items with the student loan, you are going to end up paying far more than the retail price in the end. In addition, consider the fact that many people who go to college do not get a job where they end up using their degree.

However, this does not mean that you shouldn’t get a mortgage or take out a student loan. It simply means that you are going to want to be as smart as possible about it. Get scholarships and grants to help reduce the cost of your student loan debt. Shop around for a good mortgage and make sure you have stellar credit so you can get a good rate. Get the things in life that you need, but never believe that the debt is good. Know that it is bad and do everything that you can to eradicate it.

Other Debt Mislabeled as Good Debt

Of course, there are other types of debt that many people get themselves into that they try to justify. They take out several credit cards and spend on them, so they can build up their credit history. While building credit is good, it is essential that you are careful doing this, as missed or late payments are going to rack up late fees. You also have to think about the overall cost of the interest that you are going to be paying on those cards.

Others might be trying to improve damaged credit in this manner. Again, trying to improve your damaged credit is good, but you have to be extremely careful when you are taking out credit cards and accruing even more debt. None of it is good, even if it can help you in the future.

As you can see, all debt should be considered bad debt. There is no reason that you or anyone else should try to sugarcoat it to make it seem like it’s anything other than debt that you need to pay. When you remember that all debt should be considered bad, you will find that it tends to be easier to force yourself to make your payments on time and to get out of debt faster. If you kid yourself into thinking that the debt is good debt, you are going to be tempted to dig yourself into a deeper hole.

Whether you are trying to avoid problems with debt, or you are trying to climb your way out of the aforementioned hole, the following tips should help.

Staying Out of Debt and Reducing Debt

If you are in debt, you will want to get out as soon as possible. This is true whether you are $100 in debt, or millions in debt. One of the first things that you are going to want to do is think about your current spending habits. What was it that got you into debt and how much are you typically spending in a given month on things that you do not really need?

There are likely many little things that you can do to alter the amount of money that you are spending. Even something as simple as heading to Starbucks to buy a cup of coffee each day could be causing you to stay in debt for much longer. If you only spend $4 on coffee Monday through Friday, you are still spending $80 a month and close to $1,000 in a year… all on coffee. The money from this and similar expenses that are not truly needed can help you to get out of debt and stay out of debt.

Know your budget and put together a plan. Make sure that you are making the largest payments on the debt that has the highest interest rate, so you can have it paid off first. Figure out how long it will take and commit to that timeframe. Pay even more on your debt whenever you have the chance. You could even sell some items that you do not need and use that money to help reduce your debt.

Do not fall into the “good debt” trap. Take care of all of your debt as soon as you can.