ST. CROIX INSIGHTS

I have several beliefs, but two just can’t be disputed: it takes a long time to earn money, and it’s easy to spend it like water flowing out of a faucet. I like to call this “financial leakage.” Many people are affected by financial leakage; for some, the situation is out of control.

Frankly, debt sucks. Debt makes us slaves to our lenders. Debt limits our future lifestyle and choices. But let me be clear. There are two kinds of debt—good debt and bad debt—and it’s bad debt we need to stop.

What are some ways to accumulate bad debt? Credit cards, buying that big dream home, paying for a college degree in a field with no promise of employment, expensive cars or boats…the list goes on.

Good debt, on the other hand, is investing in a business that’s cash flow positive.

A degree that can help you become employed, actually make a living, and pay off your loan within 5 years (not 20 or 30) is an example. There are times where it is good to invest upfront. The payoff can sometimes be much greater in the future.

Debt sucks, but luckily, one of the most effective ways to avoid it is also one of the easiest. Take a breather before doing anything drastic. Pause for a week or two to consider before you make a life-changing decision to take on debt. Give yourself a chance to see that big-ticket vacation. Ponder that spur-of-the-moment change in a clearer light by taking the time you need to think it over.

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Ask yourself- can my portfolio support my lifestyle in my retirement?