Tuesday, December 3, 2024

Good debt, bad debt.  Or, as I prefer to call them, good spending decisions and bad spending decisions. Debt itself is only bad when you have less expensive debt options that you’re not taking advantage of. That said, it might be easier to keep in mind the quality of your spending decisions based on the type of debt it incurs.

Jon Hanson, recognizing this important psychological factor, has dedicated his book, Good Debt, Bad Debt to explaining these differences and he’s right about them. For example, he explains that mortgages are “good debt” (or a good spending decision), whereas a loan for a wedding would be considered a "bad debt" (or a bad spending decision). Jon’s approach to explaining these differences is compelling and helpful.

A self-made “financial sanity planner,” Jon Hanson spent over 20 years in real estate and is now a full-time writer and pubic speaker. He lectures to audiences on many personal finance topics, including how to avoid income-versus-wealth confusion, and the distortion of reality caused by debt.

What I enjoy most about this book is Jon’s entertaining approach to the topic. His use of just the right personal story to make the point along with many comic illustrations make understanding how to apply his strategies a breeze.

Here’s an excerpt from one of my favorite sections, “Death by Debt”:

When people say, “These bills are killing me!” they may be closer to the truth than they realize. Bad debt can build up deposits in your cash flow arteries, and soon you could have a financial stroke.

At first, the cash flow is only restricted, but sooner or later your reduced cash flow leads to problems. Shortness of opportunities and high debt pressure are the most common symptoms, followed by a general listlessness and financial fatigue. For some people, the buildup of deposits is so serious that it leads to financial death (bankruptcy). For others, an early warning is the start of recovery. With a proper diet--budgeting and adherence to sound spending fundamentals--a full recovery may be possible.

Good Debt, Bad Debt, by Jon Hanson provides a view of the debt problem that will help you focus on success. His guide goes a long way to helping you save a bundle of cash!

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