Not all debt is bad; in fact, some debt is even considered good.
The difference: "bad debt" digs you into a financial hole, "good debt" helps you earn more money in the future.
Some examples of bad debt include high interest credit cards, pay day loans and cash advances, financing for excessive luxury items (such as a big screen television), and loans from questionable sources.
Some examples of good debt include educational loans, business start-up loans, and property mortgage loans (but always borrow only what you need!).
Some ideas for reducing or eliminating your bad debt:
- Do not open more than one or two credit card accounts (no matter how great the "rewards" program)
- Create a budget to pay off your high interest credit card debt
- Pay your entire credit card bill on time each month (if you cannot do this, you are borrowing too much)
- Budget ahead of time so you never, under any circumstance, have to use a pay day loan or cash advance (which charge astronomical interest rates)
- Use savings - not financing - for luxury items
- If you are having trouble making ends meet, consider the prudent use of educational loans instead of high interest credit cards or pay day loans
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