Step 3
Introducing Basic Debt Management
From the previous tutorial, you have learned a very crucial part of your personal financial management plan and that is credit management. And if you have credit you will have debt, because credit is the foundation of your debt.
So lets get started developing your debt management skills.
What is Debt?
Debt is the amount of money you owe to a creditor or a lender. What I have learned is that all debt is not bad. Some debts are considered to be good debt. Some are classified as bad.
How to Distinguish Between Good debt and Bad Debt?
Good debt is when you borrow money to buy something that appreciates over a period of time such as a house. This kind of debt can be considered an investment that will pay greatly years to come.
Bad debt on the other hand is when you borrow money for something that will never gain any value. One good example of bad debt is credit cards or certain car loans.
Try to stay away from those kinds of debt. Bad debt has no place in your budget. So try to eliminate those kinds of debts.
Now since you know what debt is, you need to start understanding and learning how to reduce your debt.
