Good Debt Vs. Bad Debt

As a stay at home mom, it's important to fully understand our debt situation so that we can take pains to get rid of all outstanding debt in our lives, and be able to continue to afford staying home with our children.

No debt is truly "good". There is secured debt, which is acceptable, and unsecured or consumer debt, which in most cases isn't.

Most debt is unsecured, and costs you even more money every month you carry it. Debt management is something everyone should learn it for themselves, by looking hard at the debt in their lives and choosing not to borrow when at all possible.

Secured debt is debt you owe against an item that is worth more than the outstanding balance with interest included. A good home loan is the only true example of secured debt most people have, assuming that the mortgage is a good one and you made a decent down payment when you bought the property.

We are encouraged to think that a car loan is a secured debt, but actually it is one of the worst kinds of consumer debt you can have. The depreciation of a vehicle once you drive it off the lot is tremendous, so unless you put an enormous down payment on the vehicle, odds are you owe more than it's worth from day one.

Most of us require a vehicle, however, so a car loan is one of the two "acceptable" types of consumer debt. The other is a student loan, assuming that the purpose of college is for career advancement and not a social life.

That leaves all the other types of debt securely in the "unacceptable" column. We are constantly urged to overspend by advertising and the concept of a certain "lifestyle" we think we should aspire to. We are reassured that everyone has debt, that in fact it is "normal", and offered solutions that aren't really solutions at all.

Credit cards are the root of all evil. That's a little dramatic, but you get the point.

Unless paid in full before the interest starts to accrue, the finance charges alone can run thousands of dollars a year, and many cards will offer you an increase to cover the deficit, which only leads you further away from getting out of debt.

Loans for such high dollar items such as furniture are also common. Stop and think before you take on a loan with "No payments for 2 years!".

If you can't afford it now, what guarantee do you have that you will be able to 24 months from now? Once the grace period is over, interest charges will start to mount fast and drag you deeper into debt.

The best debt advice is the oldest: Don't let the money going out exceed the money coming in. Taking the time to learn to manage your debt is fundamental to getting free of it and remaining a stay at home mom.

Rayven Perkins has been a stay at home mom, surviving on one income, for over 8 years. Visit her site Debt Advice for SAHMs for more important information about consumer debt and ways to reduce your expenses.