If you have kids thinking about going to university, a student loan could very well be smart debt for them. It seems an unimaginably huge amount of money at the time, but if borrowing $20,000 gives your kids the chance to earn a third more throughout their working lives, they will be better off in the long run.
Or if you have a house that is drafty and cold, borrowing to install insulation could be a good idea because it will help you be healthier, cut your power bills and reduce your time off work.
Dumb debt is the type that you rack up on a hire purchase for furniture, or giving your credit card a workout at the pub. It does nothing for you in the long-run, except drain your ability to invest in more sensible ventures.
This kind of debt can be a ball and chain permanently dragging you down. Get rid of it as fast as you can and resolve never to get back into it again.
Give some thought to what kind of debt you have. It has a bad reputation but, used wisely, it can give you a big boost in business and in life.
- Jeremy Tauri is an associate at Plus Chartered Accountants.