Debt. The good. The Bad. And the driving force behind it. BCSAlliance.com claims that 56% of Americans who carry debt, carry the good. So, what is the good? The good debt involves those things you need, but you cannot afford. There are three main categories in which your credit score could improve: Buying A Home, Paying For College, and Buying A Car. The key to all three? The more you put as a down payment the more likely you are to invest wisely. Buying a home can create equity. This gives you a line of credit. Assisting your children to get a college loan is more beneficial in the long run than sacrificing your health benefits or retirement funds. Financing a car, although not usually considered a wise investment, can be a great way to increase your credit score if you do so wisely. CNNMoney.com gives reasons for people to lease instead of purchase. For many people in today’s society, leasing is the best option.
So, what’s considered bad debt? The bad debt are things you do not need and cannot afford. It’s the receivables you have that are no longer collecting on. The interest rate is too high, the minimum payment is all that is being made, or no payment has been received for the debt are all signs that your debt would be considered BAD debt. Bad debts usually force consumers to fork out several times the amount of the purchase or loan. It causes confusion and costs good money.
BCSAlliance.com also claims that 55% of Americans owe nothing to credit card companies. About 25% of Americans do not have a single credit card at all. Only 1 out of 20 Americans carries too much credit card debt. Only 6% of the Americans who do use credit cards are carrying too much credit card debt, but only about 1% of these debtors have credit card balances over $20,000.
In today’s world and economic status, it is nearly impossible to live debt-free. You should set financial goals for yourself in order to stay on track and only have good debt behind your name. Once these goals are set, stick with them even when it seems it should not be done. It’s far to easy to spend more than you can afford. If you are working so hard for your money, why not make your money work for you? Invest wisely. Look into purchases or loans that will later bring in equity long after it is paid off. Sometimes it doesn’t matter if you have cash on hand to make the purchase. If you do your research, you may find it is better to borrow the money at a low interest rate.
Having credit cards or other materials that may be considered “bad debt” doesn’t mean it won’t work for you. If you know how to manage them within your lifestyle, you may find they are a key to making your money build your wealth.