Be Smart About Debt
Not all debt is bad. If you have to borrow to buy a new suit to look appropriate at a job interview or to take a course for accreditation that will translate into higher pay — go for it. Likewise, borrowing to buy a house or start a well-conceived business is a smart investment. "Good debt is anything that will help you create money in the future," says Elaine King, a financial planner at Gibraltar Private Bank & Trust in Coral Gables, Fla. What you want to avoid, she says, is any debt associated with lifestyle choices that you cannot afford — say, an expensive car lease or that dream trip to Paris. Another part of being debt savvy is paying attention to the interest rates and fees attached to different credit cards and loans. Most fees (which can dramatically increase your cost of borrowing) can be avoided if you are diligent with your payments. Arrange for automatic monthly payments from your checking account, and always pay your highest-interest loans first. That might mean carrying your student loans far longer than you expected because if you managed to secure them through a government or some other subsidized program offering below-market rates they may be the cheapest borrowing available to you this side of the Bank of Mom and Dad.