Tic Toc… That’s the sound of your debt clock



We’ve heard it all before when it comes to debt especially from those people who are sinking and have no idea how to get out from underneath.

Some people think that debt can build over time  like my friend Tony who had to pay back over $100,000 in debt, so it’s true.

Debt isn’t all bad but recognizing that any money owed is debt and it’s a debt that needs to be paid back.

Consequently you can also accrue debt faster than you can shake a stick at when you aren’t mindful of your finances. It’s just another reason I feel a budget is important for our financial health and what has helped us get out of debt.


What is debt?


We’ll keep this part simple and honest. You want to buy a mobile home that costs $20,000 and haven’t got the savings to buy it out right so you buy it on credit instead. Now you’re in debt, you are now obligated to pay for something you didn’t have the money for in the first place. There are two ways out of this, the first is to pay off the purchase and enjoy it in the mean time. The second is to sell it off if you can’t make the payments.

Along with the initial debt, interest has to be paid. Making money is what a credit company or bank does. I try to buy as many things with cash as possible which keeps my interest payments at zero. I gain extra hours at work and save for a purchase, it’s the way I’ve operated since a young boy with a paper route.


Good Debt vs bad debt


There are different kinds of debt and not all debt is bad and I’ll tell you why. The more obvious everyday debt that a lot of people get themselves into can be considered bad debt.

Those types of debt include consumer debt from spending too much on a regular basis and yet have nothing to show for it. Eating out, take out coffee, clothes shopping, grocery shopping etc if you are not careful can put a ding in your budget and dig deeper into the debt hole. The reason this is bad debt is that the residual value of the product or service is either worthless or just worth less afterwards.

Eating out multiple times a week isn’t just bad for your diet, It’s bad for your wallet too. After the product has been consumed there is nothing left. If you went into debt because of eating out then that would be considered bad debt.

Even something as essential in modern life as a car is considered bad debt. The car is never worth what you initially paid for it and it costs you every week or month to keep it if you bought it on credit.

This is where bad debts gets worse; when you buy any item on credit you also incur extra charges through the form of interest making the product even more expensive. Financing an item over a long period of time can also lead to trouble, increasing the possibility that you end up still paying for a product after its useful life has expired.

If you acquire too much debt and it exceeds your assets then you will be in negative net worth. Taking on too many debts can also lead to being liable for too many debt repayments. You keep “Robbing Peter to pay Paul” as the saying goes.

At this point a lot of people can become frustrated and overwhelmed with the bad debts that they have built up. Take control of your finances and minimize what you think you need. It’s surprising how little you actually need compared to how much you want.

Now I’m not all doom and gloom, there are good debts too. I can remember for the longest time my parents telling me I should invest in “Bricks ‘n’ Mortar” or property to everyone else.

Property values tend to increase over your lifetime and therefore represent good debt even when you have to borrow money to pay for it. There are instances when that grand purchase can be the mill stone around your neck, such as in the event of an economy nosedive. If you suddenly can’t afford that mansion because of job loss that good debt turns bad.

Educating yourself and improving your income potential by getting a loan to further your education or training is also considered good debt, as more educated people tend to work in higher paid fields.

Obtaining debt to increase your income can be a sensible choice, after all, you are taking what you have now and increasing its future value. Even in this day and age though, educating yourself and expecting a great job isn’t as easy as it sounds. There are plenty of stories about students with a lot of OSAP and consumer debt but can’t find jobs.

So, bad debt and good debt is easy to distinguish? Not so, remember the car above, there are plenty of old muscle cars that are worth far more than they used to be because they are now considered classics. One thing I can be sure of, biting off more than you can chew isn’t going to help matters when you need to enter the world of debt for a reason.

We have debt, it’s called a mortgage and so far due to property value increases and hard work paying it off will turn out to be a good debt even though we have the money now to pay it in full. It could have been a lot worse, but when we bought it we were a little on the conservative side and opted for something in the medium range rather than going for the mansion.


Debt clock


Most countries have debt clocks showing the general public how bad the national debt is and the speed at which its climbing and in all cases it’s fairly alarming. There are no personal debt clocks, but essentially you can interpret your situation into that same scenario.

When you get into debt, no matter how small an amount, the debt clock is already ticking. Your mission should you choose to accept it is to turn back the clock or reset it zero by paying off debt faster, by minimizing the use of credit or paying it off completely.

I personally use credit cards and they are paid in full every month so my debt clock only consists of the remaining mortgage. Tic Toc, this message won’t self destruct in the next fifteen seconds.

Would you consider anything else to be good or bad debt?


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  1. I think good debt becomes bad debt when it’s maxed out and the pay back period is in the double digits.

    It’s kinda like saying that all chocolate is good for you…there is good chocolate and bad chocolate. But good chocolate doesn’t taste as good when you eat too much of it.

  2. Any debt with a positive ROI is good debt as far as I am concerned. If you take out $100k with 5% interest and earn $10k extra a year because of it, that is good debt. Credit card have a positive ROI for me, rental property debt has a positive ROI for me and my residential mortgage has a positive ROI when compared to renting. Therefore, I class these all as good debt. Also, in some cases (for example the buy-to-let mortgage on the rental property) “the debt clock” in terms of inflation actually make this debt even “gooder”!! 🙂

    Having paid off all my student loans within 5 years of leaving university, I would also classify those as good debt as well.

    However, all of this debt is only sensible if you are sure of a positive ROI and you have the means of managing it if things go wrong in any aspect of your life.

    • Hi there, yes, I agree debt with a positive return on investment can be classified as good debt. There is however a risk with anything in life as nothing is for certain.

  3. If debt were not possible, we would not have a house or our current careers or my business. That being said, I still don’t like debt, and I think it should be paid off as soon as reasonably possible. Credit card debt is certainly bad in any way shape or form if it isn’t paid off every month.

  4. I have a mortgage, and that’s about it. I don’t really think of it as good debt – it won’t make me money in the long run, but it’s definitely more socially acceptable.

    • Hi there, I agree a mortgage will cost a substantial amount of money over it’s life, but paying it off early can greatly reduce this cost.

  5. I don’t really think there is such thing as “good debt”. There are some types of debt that are more socially acceptable (mortgages, student loan debt-ugg hate that one!), but that doesn’t mean having the actual debt is good, just that people are more accepting of others who have the debt.

    • Hey mate, yes all debt could be considered bad but sometimes you need to accumulate debt in order to increase income potential or upsize the family home. I think some debt is just plain unavoidable. Keeping the amount of debt you’ve accrued at a manageable level is key though.

  6. Christine Weadick says:

    I would think that most of our debt would be classed as a good debt as it is the mortgage to the house, but we also have the Redi-line and M/C. Back when hubby was working we paid into RRSP’s more so than working on paying off the mortgage. I wish we had accelerated the mortgage payment when we first set it up here, we would have had a lot more paid off when the brown stuff hit the fan. After he fell off the roof and was off for 10 months we had to cash in a lot of the RRSP’s to survive. Hubby looked on those as his emergency fund instead of building up a separate fund. Cashing those in cost us and we have never recovered from that.

    • Hi Christine, it is important to have an emergency fund. I know you can never prepare for every eventuality but planning for the worst is something we should all think about.

  7. It’s true that your time in life affects your idea about what is good debt and is bad. The older you get, the more threatening all forms of debt, even “good debts,” are to your well being, because you have less time to rebound from debt of any sort.

    My grandpa used to say that the reason advice is free is because no one ever takes it, but if you’re in your 20’s or 30’s or 40’s and reading this please do heed what I’m saying. Even if it seems you have decades ahead of you in which to deal with your debt, time slips through your fingers faster than you might ever imagine. Pay those bills off as quickly as you can, and save as much as you can for as long as you can.

    You can thank me later. 😉

    • I’m going to thank you now Beth. We are trying to do exactly that and don’t want any debt of any kind either.

  8. Ah, debt. So much fun to get into but so much harder to get out from. 🙂 Debt is something that is so important for people to understand. There seems to be a mentality these days that everybody has debt so it’s okay to have debt. The reality is all debt – good or bad – has risk. We need to be better educated about debt so we know when to leverage it appropriately and when we should avoid it. Like you, we put everything on our credit cards and pay the bill in full every month. The only debt we have is our mortgage too, which I am comfortable with. We took into consideration the life we wanted to live to make sure we could afford to pay a mortgage and still do the things we want.

    • Hello Shannon, it’s all about moderation. Some debt is easier to deal with than a lot. But for myself, no debt is far easier.

  9. Hi Mr. CBB! For me, the debt clock is the hardest part. I had no problem accumulating the debt but finding the patience to tolerate the time it takes to pay it off is really difficult. I always want it to go faster. More! Quicker! Easier! These were my buzzwords. I had to learn that persistence and patience were the only ways to win the race, there is no easy fix. The debt clock does not move faster or slower because I want it too, some things I just can’t control. Tx for the article!

  10. Great post! In my real life conversations, I usually hear friends make the distinction between good debt and bad debt when they’re looking to buy more house than they can afford — or just as bad, buying in an area and while in a stage of life that they’d be better off financially by renting.

    I didn’t have enough cash upfront to pay for grad school, but my income more than doubled after completing my coursework so that may yet turn out to be good debt.

    In practice, I think the biggest distinction between “good” debt and “bad” debt is that I’m only allowed to talk about the former on the internet 🙂

    • Cheers, there’s always an element of risk with any debt. You just have to be sensible about how much your prepared to take on.

  11. Mary F. Campbell says:

    I am like you Mr CBB. We use credit cards to gain reward points, pay them in full EVERY month but other than that… there are few exceptions to the debt rule for us.

    I will however take advantage of 0% interest loans that do not have a set-up transaction charge IF, Big Bold “IF”, we have the cash on hand and invested to pay it off when the 0% loan period expires. Why not earn the interest instead of them?? I have a credit card that’s currently offering 0% interest for 6 months and I plan to use it to: 1. buy a limited lime offer of SPG points for future travel, 2. earn Alaska Airlines reward points and 3. earn interest on the funds until we need to pay out the purchase. We have the cash to by-pass the credit card entirely but look at all the perks I would miss…airline points and interest on the money in our pocket instead of Starwood’s. If you aren’t fully covered with the cash before you start, I wouldn’t do it. Life happens and you may not be able to save it up in the interest free period. When the interest kicks in at near 20% on rewards cards, who is crying in their beer if they can’t pay it out in full? Similarly, if you aren’t totally and completely anal about reserving your funds, under all conditions to pay out the debt and you know if there’s a niggle of doubt, then again don’t do this. I invest the funds to mature 3 days prior to the end of the interest free period, on the maturity date I make an online credit card payment and avoid all interest. This is me though… hubby left to his own devices figures the recordkeeping is too much like work. I am talking say $8,000 x 2% x 182/365 days = $79.78 interest. I think it’s an easy way to earn $80 on something I was going to do anyway. 😀

    • Thanks for the reply Mary, It’s always surprising how much interest can give or take when it starts adding up over a period of time.

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