Not all debt is the same, and understanding the difference can help you make more informed financial decisions without being influenced by fear or shame. At its core, debt is simply borrowed money that must be repaid, usually with interest. The key question isn’t whether you have debt - it’s how that debt fits into your overall financial picture.

What Is “Good” Debt?

“Good” debt generally refers to borrowing that helps you build long-term value, increase earning potential, or support important life goals. While no debt is risk-free, these types are often considered more manageable and strategic. Common examples of “good” debt include:

• Student loans - When used wisely, education can increase future income and career opportunities.
• Mortgages - A home loan can help you build equity over time while providing stable housing.
• Business loans - Borrowing to start or grow a business can generate future income if managed carefully.

Good debt typically has lower interest rates, longer repayment terms, and a clear long-term purpose.

What Is “Bad” Debt?

“Bad” debt is usually associated with high interest rates and purchases that don’t build long-term value. These debts can be harder to pay off and may slow financial progress if they grow unchecked. Common examples of “bad” debt include:

• Credit card balances (especially when carrying a balance month to month)
• Payday or high-interest personal loans
• Buy-now-pay-later plans that lead to overspending

Bad debt often accumulates quickly due to high interest, is tied to short-term or impulsive spending, and creates ongoing financial stress.

Important Note: Debt Isn’t a Moral Issue!

It’s important to remember that debt is not a personal failure. Medical bills, emergencies, job changes, and rising costs can affect anyone. Financial health isn’t about perfection, it’s about awareness, planning, and progress.

Simple Tips for Managing Debt More Confidently

If you currently have debt, small steps can make a big difference over time. Here are some of our top tips for managing your debt with confidence:

• Know what you owe: List balances, interest rates, and minimum payments.
• Prioritize high-interest debt: Paying these down first can save money long-term.
• Avoid adding new high-interest debt when possible.
• Pay more than the minimum if your budget allows - even small extra payments help.
• Pause before using credit: Ask whether the purchase aligns with your goals.

Why Debt Strategy Matters

Everyone’s situation is different. What works for one person may not work for another, depending on income, goals, family responsibilities, and risk tolerance. That’s why having a clear debt strategy - not just a list of balances - is so important. When approaching debt, a financial advisor can be a great source of insight to help you create a plan that best suits your situation. A financial advisor can help you understand which debts to tackle first, balance debt repayment with saving and investing, create a realistic plan that fits your life, and reduce stress by bringing clarity to your finances.

Debt doesn’t have to control your financial future. With the right information and support, it can be managed thoughtfully, or even used strategically, on your path toward long-term financial stability. If you’re unsure where to start, consider reaching out to the Upbeat Financial Team for help! A simple conversation can help turn uncertainty into a clear, actionable plan.