So far we haven’t talked to much about debt. I hate my debt. But most college graduates have debt and some more than others.
There’s a difference between good debt and bad debt. Good debt is called
leverage. It’s a way for you to do more than you normally would be able to and you experience a benefit far greater than what the debt cost you.
Examples of good debt include student loans and business loans.
Examples of bad debt would include personal loans and credit card debt so you can go shopping. (Really? How important were those new shoes?)
If you want to be a financially successful investor then you need to manage your debt the same way you manage your investments. You should monitor your credit score each month. You can get your credit score free once each year from annualcreditreport.com and there is also a free service called Credit Sesame that will give you your score each month. If you want to improve your credit score there are a few key things you need to do.
Reduce the outstanding balance on credit cards. The less of your available credit that you actually use, the better.
Pay each card on time each month. On time payments have a great effect on your score.
The best advice is to stay out of debt so you won’t have to make decisions based on money or fear.
Update 2/7/11: This Story was featured at Military Money Might for the Carnival of Credit Score and Debt.
Photo Credits: http://students.ou.edu/H/Kasey.L.Hahn-1/studentloans.html