Bad debt vs. better debt

(WXYZ) - Maybe you’re deep in debt from your education, or you still owe lots on your home. How about your credit cards.

According to a report in US News & World Report , debt these days can be broken down into bad debt and better debt. I talked with Southfield financial planner Ellis Liddell about it. Student loans he says… better debt.

“It’s something that puts you in a position to make more money.”

But he says it’s still debt you can do something about, and we’re not just talking about paying it off.

“Salle Mae will refinance some of that debt.  But many people never go back to Sallie Mae and say to refinance my student loan… You should,” Liddell says.

Credit card debt is generally considered bad, but Liddell offers an interesting perspective on some of your charges.

“So if you are going to buy a dress and you know you have to charge it on your credit card, and you know you can’t pay that balance for a year.  That’s bad debt. Now if you are buying that dress for an interview to get a better job, then that’s a good investment in that dress because it’s going to set the stage to make more income, that makes sense,” Liddell says.

Some so-called better debts according to the report.

• -something bought with a very low interest rate that adds value.
• -debt with tax deductible interest, like a mortgage loan.

On the flip side… bad debt is…

• -debt used as cash, such as  credit card debt
• -debt used to buy depreciating assest

Bottom line… start working on paying off those “bad” debts…

“At the end of the day we are trying to save,” Liddell says. “We are a generation that has to put money away, and if don't put it away you aren’t going to have it.”