Good Debt vs. Bad Debt

No one wants to be in debt - well at least I sure don't!  When it comes down to it, not all debt is bad though - some is considered good debt.

Good debt is kind of an oxymoron.  It's good cholesterol is something the body needs.  Good debt isn't quite the same way - we don't need it, but it usually is adding permanent value to our lives.

Examples of good debt are mortgage and student loans. A mortgage is a house investment - you own an asset and usually the value of the asset is going up. Students loans for education is giving you skills that increase your value as an employee and lead you to having a bigger income. They say - an education can't be taken away from you..

Bad debt are the clothes, shoes, food/restaurants and cars.  I have a harder time putting cars on this list because they really are an asset - a rapidly decreasing asset, but an asset.  In my opinion, you shouldn't owe more on your car than it's worth. So if you have to get a car loan, make sure it's paid off before the car loses all of it's value!

Some debts are unavoidable, like a mortgage.  There are very few people who can buy a house and never owe any money on it!  I try to think of my  mortgage as an investment rather than a debt!