How to Decide What’s Good Debt, Bad Debt, and Right For You
episode
Wealthy After 40: Retirement Planning and Budgeting for Gen X
18 min
1 speaker
4 chapters
transcribed 1 month ago
Transcript
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Transcript generated automatically by AI and may contain errors.
What is the main topic discussed in this episode?
Welcome to the Wealthy After 40 podcast, the show for Gen X women and couples who are ready to ditch financial stress and feel confident about retirement. I'm your host, Dailene Higgins, money coach and retirement strategist, to help you gain clarity and confidence with your money by creating a spending plan that aligns with your financial goals and dreams so you can spend intentionally, save consistently, and feel at peace about your future. Join me every week to understand your money, simplify your decisions, and take intentional steps toward the life you want.
Welcome to today's episode. This is a re-release of episode 43. I think it's a great time to revisit this one. If you remember last episode, we talked about a relationship with debt and how as young adults in our 20s and 30s, it served us differently and we need to be planning now and and realigning that relationship. This episode will walk you through some of those things to think about. How to create that new relationship because that's all debt is, is having a good relationship. How do you manage it? So listen to this episode and hopefully you can define that for yourself.
What does 'debt' actually mean and how does delaying payment create future costs?
Today we're diving into very explanatory of what is debt and ways that you can manage debt. What is debt? It is not a way of life, but it is a part of our life. So basically, debt is a delay of payment of an expense with a future cost. OK, so in a sense, we have asked another person. I'm just going to say person, but it's a company. They're making money. This is what they do. We're asking them to pay the people we're buying the thing from. We're going to have them pay them. We're delaying our payment. And so we're going to pay this person on an agreed upon future cost, hence the interest rate. So essentially that is what we are doing. We're getting the item today, but we're delaying payment with a future cost.
An agreed upon amount and agreed upon future cost, we know both of those going into it for a specific amount of time. That is what debt is. When we go into a debt contract with a lender, with a financier, with a banker, with whoever it may be, That is essentially what we are doing. We are delaying payment of our expense with an additional cost. So I think that's really important to think about. What does it mean when you charge something on your credit card and you don't pay it off by the payment date and it's going to accrue interest? You are just delaying payment for the future for a cost. Your credit card company is going to charge you. You can pay the minimum, but I'm going to charge you this amount.
They're going to make their money. Believe me, you, they are going to make lots of money. So understanding that specific definition and that flow is very important. Yes, we have to play a part in it. Yes, we have to do that. But understanding those three elements of debt can help us be a better user of debt. Like we discussed in the last episode, that we need to participate in debt to create credit, a credit history. Once we have a credit history, more people will be able to let us borrow, especially for those bigger purchases, such as a home. That's important. And understanding how to segue that is so important, but still understanding those elements of debt that it's not just the initial price. It's not just a $20 meal that I'm putting on a credit card and not paying off.
It becomes my future expense at a, it becomes a bigger expense. It's this today's prize with a future cost. And that is going to eat away essentially at your future money. That is another way for you to think about it. Every time you commit to five years, 10 years, 20 years, whatever it may be, you're committing your salary in that duration, in that time. Now, I don't want to sound gloom and doom. I think it's just really good to have a really understanding of debt and what it means so that you can also explain it to your children. and help them get off on a better step. Your children or your grandchildren, whoever it may be, If you started your money journey and you didn't know, you were like, oh, people just go use a credit card for this and that works and it's easy.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:06–1:36
2
What does 'debt' actually mean and how does delaying payment create future costs?
1:36–7:06
3
How does borrowing reduce your future income and flexibility over time?
7:06–16:37
4
Why can debt help build credit and when is that beneficial for big purchases?
16:37–18:13
Speakers
1 identifiedMore from Wealthy After 40: Retirement Planning and Budgeting for Gen X
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