How is debt accumulated? What is the difference between good and bad debt? Who knew that there was even such a thing as "good" debt? Let's tackle this one question at a time.

We live in a society where literally every second someone is trying to sell you something. Because of the fact that sales are made based on people's emotions, all marketers out there are attacking our emotions when they try to sell us something... and we're only human, so we buy. Unfortunately, we end up buying many things that we can't afford. With extremely high interest rates on our credit cards and the products that we've financed, it is very difficult for us to get out of the hole we dug for ourselves.

Good uses of debt would be buying any appreciating asset or investing in your own or your child's education.

Bad uses of debt would be buying any depreciating asset or using credit cards to pay for the things that you can't afford. Some even use credit cards to pay for their credit cards!

How do you get rid of your bad debt? Simple. Let's say that you have three different loans. These could be a variance of credit cards or anything that you purchased through financing. The first key to getting rid of these loans is to NOT SPEND ANYMORE on anything BUT the absolute necessities in your life. The rest of your discretionary income goes towards paying off your debts.

If you can't control your spending then you have to find a way to increase your cash flow so that you can use the extra cash to get rid of your debts. Once you've gotten the necessary cash flow to start getting rid of these debts, you start with the one with the highest interest rate. The other two, you just pay the minimums on. Once you've completely gotten rid of the one with the highest interest rate, you take the payments you were making on it and you add it to the minimums you were paying on the next highest interest rate. You repeat this process until you're completely done.

IT'S THAT SIMPLE!! Don't try to figure out any other way of doing it because it simple won't work. You can definitely pay other companies to consolidate your debt for you but that costs you money. We're trying to do this without putting any extra charges on you.

Now once you're completely out of debt, it is now time to start actively managing your income. You must have different accounts for the different spending habits of your life... however that is a completely different discussion.

Resist temptation and start working your way towards financial freedom.