Hello and welcome to Moneygirls quick and dirty tips for a richer life.

Today I'm going to be talking about good debt versus bad debt.

Many people think that all debt is bad and is something to be avoided and paid down as quickly as possible.

But there are really two types of debt, good debt and bad debt.

Now one quick and dirty rule of thumb for identifying whether a particular debt is good or

bad is to ask yourself whether the debt is financing something that's appreciating or

depreciating in value. If the debt is financing something that's going up in

value it's usually good debt.

If it's financing something that's losing value, on the other hand,

it's usually bad debt.

Examples of good debt would be the mortgage on your home and a loan for a college education.

A mortgage finances a house, an asset that over the long term goes up in value, and a student

loan finances in education which is likely to result in a better paying job

and better employability down the road.

At least that's the idea anyway.

An example of bad debt would be a car loan. Most new cars lose more than half their

value within the first five years after being bought. A second example of bad debt would be money that you borrow to buy something that's

losing value that you could actually afford to buy without a loan, like a dinner out, for example.

Okay, so that's the difference between good debt and bad debt,

but what's the smartest way to pay off debt?

When tackling debt, it's a good idea to start paying down

your highest interest loans first,

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