10 Steps to Retiring Young

8) Avoid Bad Debt

Debt in itself is not a bad thing, and for things such as buying a home or a car, having a degree of debt in your life, if managed well, is better than never having debt. However, it is how you manage your debt that determines how well you will do in life.

There are several types of bad debt. Payday loans are a great example of bad debt: borrowing a small amount of money at egregiously high interest rates. For many people who take out a payday loan, they find themselves paying off the loan, only to take out the loan again, because they can’t afford to no longer have that $300-$500 they just paid the loan with.

Any loans with high interest rates or payment schedules you cannot realistically pay back will lead you into bad debt. If you cannot pay back your debt, this may lead you on a course of forfeiture or bankruptcy, where your creditor cannot recoup their money. The negative impact this will have on your credit rating can last years, sometimes even decades.