Bad Debt
Bad debts are debts which are incurred without any viable benefit in their place
Debt is neutral? Only some of it is actually neutral when it is pondered logically and reasonably. Debt management means being able to control what types of debts are incurred and being fully prepared to deal with other debts when they arrive unexpectedly. In order to do this, it is important to know exactly what constitutes which type of debt.
Bad debts are debts which are incurred without any viable benefit in their place. These would include impulse purchases, shopping for gifts or trinkets with little or no real value and any other purchase without any real or lasting gain. While their may be some emotional benefit involved, there is no real value and certainly nothing tangible or lasting.
While it may be nice to buy your significant other those diamonds or imported chocolates, they do not hold any real lasting value. Certainly making that person happy has some value, but it is not a lasting thing. For anyone who believes that it is, try delivering those items along with a healthy dose of really bad or disruptive news. Any happiness or pleasure will be instantly lost in the moment of grief that follows.
For that reason, while it may be beneficial to some limited extent, it has no real lasting value. Likewise, impulse purchases have no real value either. When you are in the gas station and fill up your car, do you load up on snack foods while you are there? Many people do this as a matter of routine.
The debts, while each usually very small and seemingly insignificant will have no lasting value whatsoever. Over the course of a month, if you spend only an average of two dollars a day on junk food or any other impulse buys, you will have wasted more than enough money to enjoy a relatively nice dinner somewhere.
Since neither of those examples provide for any lasting relief or tangible return, they would still both be examples of bad debt which was incurred without any real return on your investment. While it is recommended that bad debt be avoided anywhere that it is possible to get out of it, it is also understood that humans are, by their very nature, going to make some purchases just for the sake of having something that they want. The key is to be able to limit these purchases and make sure that you only spend money on something that you really want and not just waste money frivolously on each and every passing fancy.
If you keep an accurate accounting of all of your expenditures, you may be surprised at just how much money is wasted and how much bad debt occurs every month simply due to poor decision making and impulse purchases. This is money or debt that could be much better utilized in other aspects of just about anyone’s life.
Occasionally, things will just go wrong and bad debt must be incurred in order to keep life flowing along at its natural pace without any more disruption than is absolutely necessary. Things like cars breaking down or repairs around the home are the most common. Medical issues also are a very frequent example of bad debts.
Even with good insurance, the best of planning and trying to be prepared for every little curve that life throws our way, it is still impossible to be fully prepared for everything. In these instances, you must be prepared to deal with the bad debt. Proper debt management and controlling your expenditures and your financial situation will put you in a position where you are able to deal with these difficulties and still manage your daily life.
