How to Avoid Financial Stress Choosing Good Debt Not Bad Debt

Over the years as I have moved through financial challenges I realized that to build financial prosperity I needed to know the difference between good debt and bad debt. I know from experience that getting into debt can be really stressful for your health and happiness and can even put a lot of strain on relationships. So I share the following with you in case you are not aware of the difference between the two.

Bad Undesirable Debt

Non tax deductible Debt
If you buy on credit a material object or an experience like a car, a boat or a vacation the money you borrow is not tax deductible so it is the kind of debt you want to avoid.

Depreciating assets
If you borrow money to buy your new big screen TV or Computer or smart phone you are buying an asset that goes down in value almost immediately. So it is the kind of debt you want to avoid. Choose to pay cash when ever possible.

Credit Card
When you use a credit card and you do not pay it off before it is due you acquire the bad kind of debt. It is a bad debt because using a credit card is a small and expensive loan. The interest rate could be 18 percent annually on the money that is over due.

Good Useful Debt

Appreciating Assets
When you borrow money to buy something that may go up in value this can be considered a good debt even if the loan is not tax deductible.

Tax Deductible Investments
If you borrow money to make an investment in a business or to buy stocks or a rental property in some countries the interest on the loan is tax deductible so this could be considered good debt.

I trust this will be help for you. For more assistance I recommend you consult a financial adviser or at the very least read more in depth information on financial planning available in best selling books in the market place.

Two books my Dad recommended to me and I read are The Richest Man in Babylon and The Wealthy Barber.

I have also read Rich Dad, Poor Dad and several books by David Bach. David has a new book called Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age

Best of Success to you,

David