There’s good debt and bad debt. Good debt can allow you to acquire an asset with financial advantages more quickly than you could have enough cash saved up to pay for it. Lots of the common forms of good debt give you a tax break. Mortgages and many student loans are good examples. Even a car loan can be good debt. There aren’t tax advantages for car loans, but if having good transportation allows you to have better jobs and more flexible career options, a car loan that doesn’t overburden you financially could be a good move.
Bad debt often comes about when the debt lasts longer than what was purchased. Your instance if you eat out a lot, charge the meals on your credit card, and don’t pay your balance off every month, that’s bad debt. And bad debt is usually easy to spot by the interest rate you pay, too. Mortgages, student loans, and even car notes usually have pretty manageable interest rates. Lots of credit cards have interest rates so high that just opening the bill will give you a nosebleed.
Ending our Fiscal Fitness review with debt takes as back to where we started. If you’re saving a portion of everything that you make, you won’t get into debt. If you’re in bad consumer debt now, take the dual approach of beginning to save while you’re paying down your debt. When the debt is paid off, you’ll have started the habit of saving and can supercharge your ability to sock away more for your financial goals.