When we say eliminate debt, we are referring to bad debt only. Jason Hartman believes there is good debt as well. What’s the difference between good debt and bad debt? Good debt can be defined as investment debt, whereas bad debt can usually be categorized as consumer debt. Investment debt results from buying income property, and eventually should contribute to future income and assets. Consumer debt is any debt owned as a result of purchasing goods which are consumable and don’t appreciate in value. This is the worst kind of debt.
How Consumer Debt Can Affect You
Consumer debt hinders both personal and financial growth in a number of ways. For this reason, it’s important to eliminate it as soon as possible. Here are some areas of your life which bad debt can negatively affect:
- Potential investments, such as income property investment
- The ability to buy a
- The ability to rent an apartment
- Getting approved for loans
- Getting hired for a dream job
Take an apartment, for example. There are more than a few “deadbeat” tenants out there who just can’t seem to pay their rent on time, or at all. For this reason, more landlords have taken the initiative to “weed out” the unreliable
tenants before even offering them an apartment. How do they determine reliability? A quick examination of a credit report provides a quick snapshot of past financial responsibility. A stable rent history helps, but many young adults are stumbling into their first apartment, which makes securing a place to live even more problematical.
How to Start Tackling Debt
For starters, cease spending on anything unnecessary, and redirect the money to pay off debt. Keep in mind that the best way to gain wealth is to stop spending and put your money to work instead. Apply this concept to debt by putting the money you’re no longer spending to reduce the amount of money owed.
Next, make an honest assessment of where you’re at
financially. Examine your finances, credit score, and debt, then make a note of where improvement can be made. If you have a problem, admit it. People often spend for emotional reasons. Once you’re aware of the issue, it’s possible to take the necessary steps to overcome it.
Finally, set goals. Even a modest goal can get you started down the right path. Choose the smallest debt and throw whatever extra money you can toward it until it’s gone, and then take the next step. Maybe another small debt, or set your sights on a larger one.
Once debt is eliminated, you can move forward with a less stressful and more financially enjoyable lifestyle, but promise yourself to be more careful with money, and consider investing in good debt, rather than bad debt. (Top Image: Flickr | Images_of_Money)
The Young Wealth Team