Addressing Debt

Hi everyone! It’s officially summertime! This month I want to touch on the topic of debt and offer a few summer reading options to help you along the way in your journey to financial freedom:

  1. What is debt? Debt is the state of owing something, usually money, to someone else. It’s most often paid back to that person or entity with interest. What this means is whatever amount you borrow and the longer you take to pay it back, the more interest you will pay in addition to the original borrowed amount.
  2. How is debt used? Our financial system is based on the concept of borrowing and lending. Another word for debt that you may recognize is “financing” and what that allows both businesses and individuals to do is borrow money on good faith, with the promise of repayment plus interest. Typically, the amount and the interest rate you’re approved for is based on your credit score. The higher your score, the lower your interest rate and vice versa.
  3. What are the most common types of debt? The most common types of debt are home mortgages, car loans, credit cards, student loans, personal loans, and medical bills. Although some may argue that there’s a distinction in “good debt vs bad debt” ultimately, they’re still liabilities that hinder you from building wealth.
  4. How do I get out of debt? Debt is easy to get into and hard to get out of, by design. Once you’re focused on your goal to be debt free, list all of your current debts in order from smallest to largest and start paying them off one by one. This allows you build momentum and stay encouraged with small victories along the way.
  5. Once I’m out of debt, how do I stay out? Understanding money and how it works is a learned behavior and the best way to learn is by studying. Three books I’d recommend for summer reading are: 1) “The Total Money Makeover” by Dave Ramsey, 2) “The Millionaire Next Door” by Thomas Stanley and 3) “Think and Grow Rich” by Napoleon Hill


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