004: Money Basics: Debt

Continuing our discussion about Basic Money concepts.

Lesson #4 - Debt

Defined by Investopedia.com:  Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. But for many of us today Debt is simply fact of life. Accumulating excessive amounts of debt—whether they come from student loans, auto loans, or credit cards—can put a strain on your personal finances.

Let’s talk about types of debt: Good vs. Bad

Good debt helps you generate income and increase net worth. Examples are: college education, real estate investing, business ownership.

While even "good debt" can have a downside, (you still have to pay it back) certain debts are downright bad. Items that fit into this category include all debts incurred to purchase depreciating assets, (assets that lose value over time) such as cars, consumables (close, shoes), credit cards.

Now you know the difference, So, where are your debts like? And what are you going to do about them? How fast can you pay them down? I’d like to know.

 
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