How to Turn Bad Debt into Good Debt


The more you know about debt, the more it will work for you instead of against you. With so much financial misinformation in our society, many people think of debt as a dirty word or something to be feared. Both are untrue. All debt is good debt until it becomes unmanageable.

The key to turning bad debt into good debt is finding the proper balance in your budget. Most people know that if their monthly income is $5,000 and bills total $7,000, they are in trouble, but few realize they are also in trouble if their mortgage is $3,000 with a $5,000 a month income. Why? To stay on a healthy financial path, and avoid bad debt, your mortgage payment should be no more than one-third of your net pay. Eliminating bad debt means finding the proper balance in your budget.

Steps to Take to Turn Bad Debt Into Good Debt

It is possible to turn bad debt into good debt, and it all starts with financial literacy. You need to be able to ask the right questions. A lot of people focus on the difference between good debt and bad debt while that is still important to know, the real question you should be asking is “how can I turn bad debt into good debt?”

Say Goodbye to Credit Cards

Moving away from credit cards is one of the key steps to financial freedom. They are not for day-to-day needs, or to be used to pay all your expenses – that is what gets you into financial trouble. Try to stick to only using one or two credit cards and be sure to pay off your balances before financial charges are incurred against you. The last thing you want is even more compounded long-term bad debt.

Increase Your Income

By increasing your income you are freeing up cash flow to be able to pay down your debts. Paying down your debts is the best way to create more cash flow to fund your long-term goals. Make credit cards and loan with high balances your first priority and consider more frequent payments.

Stay Motivated

 Motivation is a key to success. Stay motivated, take your time, and do not get discouraged. Once your first card is paid off, apply the total amount you were paying each month on that card to your next credit card. You will then be paying the minimum amount due on the second card plus the total monthly payment you were paying on your first credit card. Continue with this process with all your cards and other forms of bad debt. As you continue to pay off each debt, the monthly amount you are paying on the next debt will escalate.

Build Your Wealth

Once you beat your bad debt, take the monthly payment you were putting towards you last debt, and put that money towards investing.

There is no shame in having financial trouble. Many people find themselves in over their heads – and it can happen quickly. Hopefully, you now understand the difference between good debt and bad debt. It’s time to take control of your finances! At Tayne Law Group, we’re dedicated to helping people overcome the burden of their debt. From student loans and credit cards to medical bills and personal loans, we’ve seen it all! Call us today at 631-470-8204 for a free phone consultation.

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What People Have to Say

I just wanted to thank your entire staff at The Law Offices of Leslie H. Tayne, for helping me get out of debt. If it wasn’t for your firm, I would have never been able to resolve my $13k worth of debt in less than 3 years. Your staff did a great job, I was finally able to buy myself a brand new car without using a cosigner. I can’t tell you again how happy I am. I would recommend your services to anyone.

L.C. Client 2007-2009

I sleep like a baby at night now because of the work that you and your office have done. Rest assured that I will refer anyone I know to your office with conditions that are similarly circumstanced.

R.S. Client 2012-2014

You have been very helpful at first directing me in the right direction when I had no clue how to go about handling everything, I really appreciated all your advice and help and hope we can work something out. Thanks again for all your help and kind words, and patience.

D.M. Client 2009-2012

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