Debt, Part 1: Uncollateralized Debt

What's up with debt?! Never ever, under no circumstance, should you have debt. Debt is the best and having it has made me wealthy. What in the world are the guru's talking about?! Sure! Both sides of the debt convo use the blanket term "debt," but they are not talking about the same thing at all. One side talks about "uncollateralized debt" while the other is talking about "collateralized debt." Got it? Collateral: The assets which are pledged as security for a loan. Thanks to our friends at Investopedia for this helpful definition and our word of the week! This episode is all about the "un" side of debt. Most of us experience this in the form of credit card debt and student loans. These are loans that are given to you with no collateral other than potentially your future income earning. These often come with high interest, like 25% on a credit card, or high balance, like $100,000 for college. Either can be a recipe for drowning financially. It is important to ask yourself, when listening to debt advice, to understand which type is being talked about. We will get into the other side of debt next time. Penny For Your Thoughts It is easy to judge the "un" debt, the credit card debt or high student loan balances of some, but for many this is the only way they could get access to money, to cover medical bills, help family in need, cover an emergency. Many financial things are outside of our control and non-judgmental understanding goes a lot further in finance than rigid rules meant to shame. What's Up With Money?! Book Club We have two articles for you this time around! All The Personal Finance Books Are Wrong by Derek Thompson Popular Personal Financial Advice versus the Professors by James J. Choi