The Difference Between Good Debt and Bad Debt

A lot of people get nervous when discussing debt and that’s not such a bad thing for most consumers and businesses. Debt isn’t a toy for enjoying life’s pleasures; it’s a tool for building financial capacity and growing business operations. Here are some tips for using debt to help develop financial prospects.

Avoid dead-end debts, like taking out a loan to cover basic living costs, or taking a financing package to buy a depreciating commodity. If the debt isn’t being used to develop future finances, it’s a dead-end debt.

Paying off debt is a priority for anybody thinking about their future. When debts start to get out of control, follow these guidelines:

  • Create a budget to cover living costs and pay off debt.

  • Consolidate debts into one low-interest plan.

  • Speak with a financial planner.

  • Avoid taking on more debt.

  • Cut out unnecessary spending.

  • Manage your debtors.

 

When considering taking on a debt to buy an asset, ask yourself:

  • Will this be worth more or less in the future?

  • Will this generate income?

  • Does this assist productivity?

 

Source: http://www.flyingsolo.com.au/finance/financial-management/good-debt-how-to-use-debt-to-your-advantage

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