Debt Management: Do You Really Want to Get Out of Debt?

Debt Management: Do You Really Want to Get Out of Debt

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Do you really want to get out of debt, or are you just saying that? It seems to be that at the moment; the world is telling us all to repay our debts as quickly as possible, but is that the RIGHT answer for you?

Let's face it . . . if there were no one owing anyone any money . . . we probably wouldn't need a lot of financial institutions and how could we possibly get a return on our savings when it wasn't being lent out? So, not all debt is bad debt. Basically, none of the more successful people, who we see in our Business News and in the magazines, achieved what they did without borrowing any money.

So, what constitutes a bad debt and a good debt? And no! I am not talking about a debt that is and isn't paid back!

Good debt can come in two categories; one for personal situations and one for business situations. In the personal situation - say a mortgage to buy a home, good budgeting and cash management can lead the way to early repayment of that debt, provide you with the home you want and teach you more about the how you can successfully run your cash.

The second category is Business debt. In most places around the world this type of debt attracts some tax deductibility, which is beneficial to the business owner. Generally speaking, this type of debt is used to "leverage" the business and make it more productive, maybe to employ more people, to increase turnover or maybe even to purchase another business to grow.

Both of these examples could be seen as good debts. What about bad debt? Well unfortunately, there are many types. They tend to linger around for a long time ... it's when you have multiple credit cards and multiple time payments. It's when your let your mortgage payments go for 25 years and you don't try to pay them off early. It's when you let the emotion of wants' out weigh the logic of needs' and when the art of juggling is not about juggling balls, but rather about juggling credit cards and payments.

So, debt can be a good thing - just try to manage it so it never controls you.

For more financial tools, easy-to-use money calculators, and free financial advice visit Barry Kloogh at http://www.TheMoneyCookbook.com?money_tips. Barry Kloogh is the author of The Money Cookbook, and a top financial consultant with offices in Dunedin, New Zealand and the United States.

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