There is no such thing as bad debt, but there is bad debtor. Certain attitude and mindset are required to stay out of debt. This article offer some tips or insights on how to get out of debt.

Let’s face it, everybody has been in debt at some time or other in their lives. Most people view debt as a bad thing. But, not all debts are bad, there is a distinction between bad debt and good debt. What is the difference?

Well, a good debt is an investment debt that creates value in the future. For example, a student loan is a good debt because you’re investing in education for your future. Another example: mortgage loan. When you take up a mortgage loan at the right time, you’re owning a home that is likely to increase in value.

On the other hand, a bad debt is a loan you take to buy something that is decreasing in value. For example, taking a loan to buy a brand new car will create a bad debt immediately. Because a car will depreciate in value the moment you drive it out on the road. If you really need a car to survive, buy a used car instead. Why buy a beand new one? Unless of course if you’ve extra cash to spend and are free of debt. There are many examples how a person can get into bad debt. Overspending on credit cards, being a shopaholic, extravagant lifestyle, poor budget planning, losing a job, etc..

Actually, there is no such thing as bad debt but rather bad debtor. As you can see from some of the examples above, it’s an individual’s knowledge and attitude that will determine whether he or she would stay out of debt or become a bad debtor. Take the right loan, it can actually help you create wealth; take a wrong loan, you will end up being a bad debtor.

Here are some simple but practical tips to help you stay out of debt.

• Practice some economy in your life. Meaning that set a spending budget based on your financial ability, use your common sense and then stick to it.

• Learn to keep track of your spending. Don’t leave it till the next day or end of the week. Instead, keep track of how much you are spending each time you buy something. Keeping a tally of what you spend will make it less likely for you to spend on stuffs that you don’t need.

• If you can’t resist from using your credit cards, don’t carry them in your wallet. Credit cards can be advantageous if you use them responsibly. Because there are companies that offer up to 50 days interest free on purchases. But, if you don’t have a habit to pay your outstanding balance on time, forget about using a credit card as you would most likely fall into a bad debt trap.

• If you have any spare cash lying around, don’t go and spend it on a new dress, or on an expensive dinner. Put it to better use. And if you have debt, use it to pay off your debt. Know your priority.

Staying out of debt just needs some common sense. Hope you find the tips useful.

>>> If you are serious wanting to stay out of debt, check out this ebook: “Become 100% Debt Free“. I have read it myself and it provides tons of easy and practicel tips to help you stay out of debt completely.

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This entry was posted on Thursday, October 23rd, 2008 at 10:07 pm and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.