Is this debt good or bad? Debt is good or bad based on how the money is used. If you borrow money to take a vacation, buy clothes, jewelry, shoes then that is bad debt.
Debt is good if someone else pays it for you, the bank or the positive cash flow of your business or if the income of your rental property pays for the debt and expenses of the rental property.
When borrowing money to purchase assets if the business or rental propery pays for the debt, then it’s good debt.
How do you get out of bad debt?
Make a list of all the bad debts and the minimum amounts per bad debt. Pay the minimum on all the bad debts except the one bad debt you are focusing to pay off first. Pay the debt with the least amount owed first. Pay the lowest debt first and also pay off an extra amount.
This means that all the money that you borrow is not bad debt. It is what you do with your money that makes the difference. We are conditioned years and years that all debt is bad. This is not always the case. If your business or real estate pays for the debt then it’s good debt.
When acquiring debt ask yourself the question if it is good or bad debt. If someone else is paying the debt for you, the bank or the positive cash flows of your business is paying the debt for you, it’s good debt. Know the difference between good and bad debt
Action exercise:
-Make a list of all your debts and analyze your debts.
-Make a debt reduction plan for all bad debts.
For your financial success!
