Not All Debt is Bad

by Debbie Vasen | More from this Blogger

24 Jan 2008 06:11 PM

Yikes... what did you just read? Not all debit is bad?? How can that be? In these days of bankruptcies and foreclosures, how can anyone feel that any debt could be good?

Just like anything else in life, your money management is a balancing act. If you constantly shower your kids with love and do everything you can to please them, you end up with troubled, spoiled children. If you spend all your time working, you end up unhealthy, stressed and lonely. You have to balance parenting with discipline AND love. You have to balance your work with the rest of your life. You also have to balance your money.

If you never carried any debt, you might have a great credit score... but you also might not be able to afford a home until you retire. You might not ever get your dream job because working for minimum wage doesn't pay the bills when you are also paying college tuition.

There are some very good reasons for debt. It can help you buy a home. It can help you get the education you need to find a worthy career. It can help you buy a car to drive to work or school. It can help you start a business or even help you in an emergency.

The key to determining what is good debt vs. bad is to look at these main factors.

Is the debt secured or unsecured? Credit card debt that is unsecured vs mortgage debt that is secured affects your debt portfolio differently. Typically, unsecured debt has a higher interest rate and cost, and you typically have "little" to show for it.

Are there tax benefits? The government has their not so subtle way of showing you which debt they think is good. If you can deduct the debt's interest from your taxes (like a mortgage or student loan) that is a sign of good debt.

Will the loan help you achieve your goals? Debt like a student or business loan is often unsecured debt. However, it does help you not only achieve personal goals, but also the potential to earn more money in the future.

Related Articles:

*Bankruptcy

*Credit Counseling

*Should You Borrow as Much as You Can?

Learn more about Debbie Vasen

Debbie Vasen is a published web content editor and writer, as well as a freelance writer for various print publications. In addition to blogging at Families.

View Full Profile | More from this Blogger