• It’s something that will enhance your ability to earn more income, or truly improve your well-being (i.e. education, health rehabilitation, real estate investment).
Anything else that doesn’t have both characteristics of good debt, is bad debt. This means that anything else, no matter how small or necessary (like food, medicines, luxury items), were purchased using credit or a loan, is a bad purchasing move.
So while it’s difficult to go around these days without a credit card to your name, you can spend most of your days without it inside your wallet. Use cash or debit cards instead for your everyday purchases, or a check for large purchases. The only time you’ll need to carry your credit card around is when you’re about to purchase something you really need to use a credit card with—and hopefully, it’s for something that won’t depreciate!—or, if you’re traveling abroad and need something
in case you run out of cash.
If you’re already knee-deep in bad debt, you might want consider using your savings or existing non-liquid assets to reduce your debt and solve the problem in the soonest time possible. Perhaps you have a few shares of stock that you can sell, or a life-insurance policy with a cash-value balance you can use. Remember, debts accumulate interest, and it might be
better to zero out your problems instead of waiting for the next paycheck or bonus to come around.