By Kelly Howe

Millions of people work hard all their lives. They support their families and have a very comfortable life. If the unfortunate happens, and you become ill or unable to make financial decisions for yourself, a living trust may be an option worth investigating.

There is a lot of confusion of what a living trust is. Despite what some people believe, a living trust and a living will are two separate but legal documents that are binding in any court. A living trust can protect your assets should you be unable to make decisions for yourself. It is important to understand that you cannot use a living trust for illegal purposes.

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By Paul Christos

The amount of credit card and auto loan debt carried by the average US Household is a staggering $18,500 to $23,500 per household. At 6% interest, $20,000 of debt accrues approximately $1,200 per year or $100 of per month of additional debt. The worst part about carrying this much consumer debt is that there is no intrinsic value in carrying it. This is “Bad Debt” because the interest paid on it can not be itemized as a tax deduction on your income taxes each year. Mortgage interest expense (“Good Debt”), as an example, can be itemized and taken as a deduction on your tax returns. As a result I have made it my personal obligation to minimize this type of debt as much as humanly possible. I am a realist and recognize that different situations require different financial measures. So, I am not agnostic to the fact that, for certain households, taking on consumer debt is a practical necessity and enables day-to-day survival. What I would like to do with this article though is to provide some advice based upon my experiences and some practices that I have adopted over the years to help eliminate “Bad Debt”.

* Figure out who you owe money to and categorize it into either “Good Debt” or “Bad Debt”. This is the single most important thing you can do. “Good Debt” is debt that is secured by an asset that appreciates in value. An example here would be real estate. “Bad Debt” is debt that you take on in which there is no tangible evidence of an asset that appreciates in value. The types of debt that I put into this bucket are credit card debt, auto loan debt, personal loans such as installment loans, debt used to finance education but not technically classified as student debt and any other loan obligation that is not specifically represented as ownership of an asset that does not appreciate in value. That 52” plasma TV you put on your credit card or that Kawasaki motorcycle you purchased is not an asset that appreciates in value, therefore it is “bad debt”.

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