The good, the bad and the ugly of debt

YOU can't take it with you so ensure you look after yourself with good debt not bad.

KNOWLEDGE IS POWER: Investing in education be it a formal degree, trade qualification or course at a community college is good debt. Picture: SUPPLIED

ALL this talk from politicians about good debt and bad debt is just another way of confusing the issue.

Treasurer Scott Morrison's new approach to 'good' and 'bad' debt will be interesting to hear when he cuts details of the Budget 2017-18 loose at approximately 7.30pm (AEST) on Tuesday 9 May 2017, as he commences his second reading speech.

Oh joy.

But what this plethora of weasel words used by the bean counters of Canberra around the budget generally results in is less for us and more for them.

So in the meantime, here's a tongue-in-cheek real-life guide to sorting out your finances.

While good, bad and ugly debt is subjective, remember anything which will make your long-term future brighter, happier, safer and a better place to be, plus allows you to make a genuinely positive contribution to your community and society is good debt.

GOOD DEBT

Activity - Bicycles, surfboards, footballs, gym workouts, golf clubs, in fact any sporting equipment and club membership which makes you feel better, fitter and happier. Join the local archery, cycling, bowls or football club. Sign up for the pilates or badminton course with a friend or on your own. Feel the wind in your hair on the mountain bike trail, the slap of he ocean as you paddle out, the grass on your back during the rugby tackle, the sweat on your face during a tennis match and the stretch in your hamstrings during yoga.

GOOD DEBT: Buy that bicycle and get to work, school, uni or to see your mates. Ditch the second car if you can and use the savings to follow your dreams. Picture: Supplied

Home ownership - Despite the high property prices, parts of the Northern Rivers including Lismore, Casino, Kyogle and other towns have properties which may suit first home buyers. OK, you may have to start off in a house or flat which is not your ideal, but it's a start. If you don't own your home, start a savings account and aim to put at 5% of your earnings towards one. It will add up faster than you think and who knows what new incentives the government may sling your way to become a first-home buyer?

GOOD DEBT: Saving up to get your home can be difficult. But even putting aside 5% of your income can add up. Picture: Supplied

Nesting - Make your home a haven. If you own your own home, the accepted wisdom is for every dollar you spend you get two back in property value. So paint those walls, renovate the kitchen, re-tile the bathroom, freshen up the laundry, put in new ceilings, polish the floorboards, remove the non-load bearing wall or have the old wiring or plumbing replaced. Perhaps not all at once as I am doing, because living in a building site means you are tempted to spend even more on good debt to off-set the stress of doing a rebuild.

GOOD DEBT: Investing in your own home is good debt, unless of course you over capitalise. Perhaps the indoor swimming pool is not a good idea. Picture: Supplied

Education - Be it at TAFE, university or community college, learning is good for your brain, soul and general well-being. Take a leap of faith and sign up for the course you have been dreaming about. The one you have not told anyone because you are afraid to have a go. The one which makes you breathe in tight and heart soar when you think of it. Live dangerously. Take the art course. Study physics, plumbing or medicine. Sign up to be a teacher yourself. New knowledge and skills are a fantastic investment.

Pets - People with pets live longer, happier and healthier lives. Whether this is a rescue pooch or a posse of cheeky chickens you keep for their eggs and manure for the veggie patch, having animals in your life gives a greater benefit that far outweighs the cost of pet food and vets bills. Coming home to an animal who lives for your cuddles, pats and going to a walk in the local park is a fantastic way to maintain your own mental heath. Animals agree with your every word and generally think you are fabulous no matter how zombie-apocalypse you look first thing in the morning.

GOOD DEBT: People with pets have been to shown to be happier and live longer. No matter the food cost for Fido, this is a good debt. Picture: Supplied

Superannuation - If you are self-employed, for goodness sakes make sure you contribute to your own industry super fund. If you employed someone else, you'd have to so make sure you take care of yourself because you never know what the future will bring.

GOOD DEBT: If you are self employed you must ensure you after the future with superannuation. Picture: Supplied

Kindness - Looking after yourself, your family, friends and colleagues. Invest in relationships. Spend the money on petrol or a flight to visit your aged parents. Buy that bunch of flowers for your partner. Bake your neighbours a cake. Invite your mates around for a game of kick-to-kick followed by a barbecue. Get the family together for Sunday lunch and have everyone bring a plate. Life is short, so make time to catch up with people.

GOOD DEBT: Taking care of yourself and your family by eating healthy and tasty meals is a great investment for your future. Picture: Supplied

BAD DEBT

Extra motor vehicles - How many cars do you and your family really need? Obviously if you have multiple school, sport, work drop-offs then it's more complicated than living on your own with only a few km to get to uni or work. Think about how you get by with one less car and cycle, walk, car-share or get the bus. Your potential financial savings and increased fitness benefits are huge. With all the money you save you could travel or follow another dream.

BAD DEBT: Avoid buying a new car as it generally loses value once it leaves the showroom. Can you get away with one less car in your family? Think about how you could better use the $ you currently spend on the extra car. Picture: Supplied

Credit cards - Australians have racked up $38 billion on these plastic vampires. Pay them off and keep them for emergencies only. Ignore the bank's pleading and offers for even more finance. As Tom Waites sang, "the large print giveth and the small print taketh away.” Get help at ASICs Money Smart.

BAD DEBT: Credit card debt for a holiday can be a bad investment. Pay of the cards asap. Picture: Supplied

UGLY DEBT

Smoking - Stop and you will have more money to spend on what's really important. You'll be healthier, live longer and you'll feel so much better. Information about Quit here.

BAD DEBT: Smoking is literally burning away your hard-earned cash, ruining your body and taking away long-term health. Quit. Be the best person you can be. Picture: Supplied

Excessive alcohol - If you are at the stage of hiding your bottles in the yellow bin or buying drinks from different bottle shops, maybe you need to reconsider. I'm not talking about the occasional beer, glass of wine, cider or single malt. Too much alcohol damages your physical and mental health, relationships and your ability to be the best person you can. For help contact AA.

BAD DEBT: Too much alcohol is bad debt for your wallet and your health. If you need help, get it. Take control of your life,. Picture: Supplied

Drugs - Cheap to start off with, expensive to maintain and progressively ruinous to pretty much every part of your life. Get smart and get off them. It won't be easy but you can do this. Get help here.

BAD DEBT: Drug use costs more than simply money. It can impoverish your mind, body, soul and spirit. Picture: Supplied