Debt Reduction blog: 11th September 2008

There are two types of debt, good and bad. It really is that simple, broadly speaking there is personal debt and investment debt. Personal debt would be anything that is spent on assets likely to depreciate rapidly (some would argue housing belongs in there recently!) or that has no ongoing inherent wealth creation once used. If you were to say that with the two debt types they can be either good or bad then personal debt would lean to the ‘bad debt’ side, although it doesn’t mean it’s an actual bad debt in the sense that payments are being missed.

An example of this would be money spent on a car, clothes, furniture etc. with personal debt you should always try to ensure you have a good reason for incurring it in the first place, not simply out of ‘ease of use’. If your car broke down a new (new can also be second hand!) car may be warranted, a new car for the craic may be affordable but from a debt perspective its deplorable.

Then we get onto what …

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