In today’s world almost every person has some sort of debt. What’s important is that we understand not all debt is equal and some debt is good. Some of the regular debt carried by people can actually help them become more financially successful. In this blog post, we’ll give you some examples of good and bad debt and give you a better sense of how to manage your finances.
Good Debt
In general, good debt can improve your finances and is considered an investment for the future.
Here are a few examples:
Mortgages: Mortgages are considered good debt as you are purchasing property that can increase in value over time. This real estate property you purchase can become a source of income for you and your family.
Education loans: Taking out a loan for school means you are investing time into learning more and improving your knowledge. The degree you receive can help you secure a high-paying job.
Business loans: Like the two examples above, taking out a business loan can be seen as an investment for the future. As your business grows, you can increase your income and use your profits to explore other business ventures.
Bad Debt
Bad debt is any debt that hinders your financial well-being and puts a lot of negative financial pressure on you.
Two examples are:
Credit card debt: Credit cards carry high interest rates, and your bills can quickly spiral out of control.
Car loans: Many of us rely on getting around daily with a car, but often times, people purchase cars that are out of their price range. You’re stuck paying thousands of dollars per month for a depreciating asset.
