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Debt reduction depends on which type of debt you have
For debt reduction purposes is important to know the difference between good and bad debt. Why is important? Because if I ask you what is better: to live debt free or to live constantly with debts and your answer is: To live debt free. The correct answer is: depends. Let's see why...
I learned the definition of good and bad debt from Robert Kiyosaki. Put it simply: good debt puts money on your pocket and bad debt takes money from your pocket. That is the reason to say: depends.
For instance, if you constantly buy products with your credit card and your balance remains the same or probably is increasing then this kind of debts are bad because takes money from your pocket in the form of interests. Obviously this is the perfect candidate for debt reduction.
But if you get a debt to buy products you sell them and this operation allows you to payback the principal and interests plus a profit for you, that's a debt that puts money on your pocket and therefore: a good debt.
Simple but important. So, what kind of debt do you have?
What to do if you don't want bad debts or are already drowned in debts and want a debt reduction?
For this purpose, is important to understand what debt management is and what kind of debt management programs exist and what they do. You can even share you experiences in this page.
Once you have learned this we can talk about bad debt management and debt management plans for debt reduction.
Understanding the relationship between freedom and debt management is crucial; the clue is to leverage your own money.
Also, is important to know what credit card debt management is and if debt consolidation and management is an option suitable for you and the risks involved.
If you buy mainly with credit cards or any kind of debts maybe you'll need a consumer debt management. A debt management ratio can help you monitor your debts too.
Although Robert Kiyosaki teach us that a house is not an investment because yields nothing, a house is a family's dream, a necessity and one of the biggest transactions people do in their lives. Therefore, is crucial for your personal finances a mortgage and to learn how it works.
Now that you have learned a little more about debt management we can continue learning about financial planning in the next section. See you there!
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