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How To Distinguish Between Good Debt And Bad Debt

Career

Debt for many people is a way of life. However, there is so much financial misinformation that many think of debt as a dirty word. There are many differences between what is considered good debt and bad debt, and we are here to clarify them. Before taking on any kind of debt, consider if this debt will have a positive or negative effect on your financial situation.


What is Good Debt?

Good debt is any debt you acquire with the ability to pay back for the term of the loan. All debt is good debt until it becomes unmanageable.

Taking out a car loan

You should only apply for a car loan if you have a stable income to comfortably make the monthly payments. When your car loan is approved, then this is considered good debt because it means an institution trusted you enough to loan you money.

Borrowing money for a student loan

Student loan debt is rarely ever a bad decision. Due to the high cost of college, sometimes you have no choice but to take out a loan. It is not frowned upon because you are pursuing something that will be beneficial to you in the future. It is important that you be responsible when these loans come in and you make all monthly payments on time so your debt remains in the “good” category. If you struggle to pay in a timely fashion each month, then you may want to consider having an income based payment plan or extended payment plan. Make sure you do your research before your loan payments begin. Once you start missing payments, then this can become bad debt.

What is Bad Debt?

All debt comes with strings attached. It is only when those strings become uncontrollable and hard to reach that your debt can become bad debt. Remember, all bad debt can flip into the positive if you manage it more closely.

High credit card debt

The average household credit card debt is slowly increasing every year. It is when your credit card continues to increase and reach the limit that it becomes bad debt. To ensure it doesn’t stay this way, make your highest interest credit card your top priority. Try your best to get your balance down to $0. If this is too difficult to do in a month, then try for a 3 month pay-down. For example, make your usual monthly payment and then consider contributing additional payments whenever you can.

All bad debt can turn into good debt if you manage it more closely.

If your tax refund is sitting in your savings, this may be a good time to tap in and use a small portion to help pay off your credit card quicker and more effectively. Tackle that debt as soon as it gets out of hand to ensure it doesn’t happen again.

Non-essential items

It has been noted from financial experts that the majority of discretionary expenses (needs vs. wants) is non-essential. An expense can be determined as non-essential if you are following a budget plan and motivated to remove the bad debt. Non-essential items that you may want to consider removing from your budget can be: $5 lattes twice a day, take-out lunches 3 days a week, designer clothes, top-tier cable TV stations, season tickets, and other novelties. These non-essential items can cause you to go into bad-debt because they tend to get out of hand. Overspending tends to be a bad habit, but it’s something you can break easily!

..It is important you make all your payments on time so your debt remains in the "good" category.

There is no shame in having debt. Without it, we wouldn't be able to achieve many milestones in life like going to college, buying houses and cars. To ensure your good debt never becomes bad debt, take time in creating a budget for your short-term and long-term financially planning.

Rather than fearing and avoiding your debt payments, embrace them and learn to manage your situation properly. If you prepare for your bills to come in and budget effectively, then your money will be better managed and your debt will never turn on you.

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Business

How Postpartum Mesh Underwear Started My Entrepreneurial Journey

"Steal the mesh underwear you get from the hospital," a friend said upon learning I was pregnant with my first daughter.


It was the single best piece of advice I received before giving birth in December 2013. My best friend delivered her daughter eight months previously, and she was the first to pass along this shared code among new moms: you'll need mesh underwear for your at-home postpartum recovery, and you can't find them anywhere for purchase. End result: steal them. And tell your friends.

My delivery and subsequent recovery were not easy. To my unexpected surprise, after almost 24 hours of labor, I had an emergency C-section. Thankfully, my daughter was healthy; however, my recovery was quite a journey. The shock to my system caused my bloated and swollen body to need weeks of recovery time. Luckily, I had trusted my friend and followed her instructions: I had stolen some mesh underwear from the hospital to bring home with me.

Unfortunately, I needed those disposable underwear for much longer than I anticipated and quickly ran out. As I still wasn't quite mobile, my mother went to the store to find more underwear for me. Unfortunately, she couldn't find them anywhere and ended up buying me oversized granny panties. Sure, they were big enough, but I had to cut the waistband for comfort.

I eventually recovered from my C-section, survived those first few sleepless months, and returned to work. At the time, I was working for a Fortune 100 company and happily contributing to the corporate world. But becoming a new mom brought with it an internal struggle and search for something “more" out of my life--a desire to have a bigger impact. A flashback to my friend's golden piece of advice got me thinking: Why aren't mesh underwear readily available for women in recovery? What if I could make the magical mesh underwear available to new moms everywhere? Did I know much about designing, selling, or marketing clothing? Not really. But I also didn't know much about motherhood when I started that journey, either, and that seemed to be working out well. And so, Brief Transitions was born.

My quest began. With my manufacturing and engineering background I naively thought, It's one product. How hard could it be? While it may not have been “hard," it definitely took a lot of work. I slowly started to do some research on the possibilities. What would it take to start a company and bring these underwear to market? How are they made and what type of manufacturer do I need? With each step forward I learned a little more--I spoke with suppliers, researched materials, and experimented with packaging. I started to really believe that I was meant to bring these underwear to other moms in need.

Then I realized that I needed to learn more about the online business and ecommerce world as well. Google was my new best friend. On my one hour commute (each way), I listened to a lot of podcasts to learn about topics I wasn't familiar with--how to setup a website, social media platforms, email marketing, etc. I worked in the evenings and inbetween business trips to plan what I called Execution Phase. In 2016, I had a website with a Shopify cart up and running. I also delivered my second daughter via C-section (and handily also supplied myself with all the mesh underwear I needed).

They say, “If you build it, they will come." But I've learned that the saying should really go more like this: “If you build it, and tell everyone about it, they might come." I had a 3-month-old, an almost 3 year old and my business was up and running. I had an occasional sale; however, my processes were extremely manual and having a day job while trying to ship product out proved to be challenging. I was manually processing and filling orders and then going to the post office on Saturday mornings to ship to customers. I eventually decided to go where the moms shop...hello, Amazon Prime! I started to research what I needed to do to list products with Amazon and the benefits of Amazon fulfillment (hint: they take care of it for you).

Fast forward to 2018...

While I started to build this side business and saw a potential for it to grow way beyond my expectations, my corporate job became more demanding with respect to travel and time away from home. I was on the road 70% of the time during first quarter 2018. My normally “go with the flow" 4-year-old started to cry every time I left for a trip and asked why I wasn't home for bedtime. That was a low point for me and even though bedtime with young kids has its own challenges, I realized I didn't want to miss out on this time in their lives. My desire for more scheduling flexibility and less corporate travel time pushed me to work the nights and weekends needed to build and scale my side hustle to a full-time business. If anyone tries to tell you it's “easy" to build “passive" income, don't believe them. Starting and building a business takes a lot of grit, hustle and hard work. After months of agonizing, changing my mind, and wondering if I should really leave my job (and a steady paycheck!), I ultimately left my corporate job in April 2018 to pursue Brief Transitions full-time.

In building Brief Transitions, I reached out to like-minded women to see if they were experiencing similar challenges to my own--balancing creating and building a business while raising children--and I realized that many women are on the quest for flexible, meaningful work. I realized that we can advance the movement of female entrepreneurs by leveraging community to inspire, empower, and connect these trailblazers. For that reason, I recently launched a new project, The Transitions Collective, a platform for connecting community-driven women entrepreneurs.

As is the case with many entrepreneurs, I find myself working on multiple projects at a time. I am now working on a members-only community for The Transitions Collective that will provide access to experts and resources for women who want to leave corporate and work in their business full-time. Connecting and supporting women in this movement makes us a force in the future of work. At the same time, I had my most profitable sales quarter to date and best of all, I am able to drop my daughter off at school in the morning.

Mesh underwear started me on a journey much bigger than I ever imagined. They sparked an idea, ignited a passion, and drove me to find fulfillment in a different type of work. That stolen underwear was just the beginning.