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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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