The One Minute Millionaire Diamond Mine
 The Wealth Factor
 Stock Market Strategies
 By Dr. Stephen Cooper

Personal Financial Basics: On Debt

Is debt a good thing or is it just bad, no matter how you slice it? Usually, if you are the one in debt, it doesn’t feel very good. Can we then lump it all together into one neat package labeled “Nasty”? Firstly, we should understand that, like money, debt is not inherently good or bad. Rather, the virtue or vice of debt is illuminated by how we use it. In a moment, I’ll give you an easy exercise to help better understand debt.

Three Kinds of Debt

Because debt is not all the same, let’s divide it into three categories in order to better understand more of how you are using credit.

  1. Consumption
  2. Wasting Assets
  3. Education/Investment

    In this first category are the following: food, gas, utilities, telephone charges, cable TV, entertainment, and vacations. In other words, anything that is “used up”, and must be replaced or replenished, falls into this category. Anytime credit is used to buy an item or service or experience in the consumption category, a big red flag goes up.

    Wasting Assets
    Wasting assets include clothing, toys, furniture, carpet, decorating, and automobiles. These are items that, once purchased, decline in value over time.

    In this third group we find such things as tuition and books or business startup costs.

The Challenge

Whenever short-term items or situations are financed with long-term dollars, you run into trouble. Consider this; if you go out to dinner tonight, and put the bill on your credit card, you run the risk of placing that meal into long-term financing. If you pay off the card at the end of the month, then there is no problem. But for every month that you carry a balance on that card, you are–in part–financing that meal. Even with the current low overall rates, many credit cards continue to run interest rates of up to 18%. If you chronically carry a balance on your card(s), you could wind up paying for that meal twice, or more. The same can be said regarding groceries, gas for the car, light bills, clothes, or decorating items.

The Exercise

Gather your credit card statements for the past three months. Go through each purchase and decide which of the three categories; consumption, wasting asset, or education/investment best describes that purchase. Write a 1, 2 or 3 to the left of each purchase.

Now, add up the ones, twos and threes to see where the greatest percentages of your purchases are. If you find that the highest percentage of purchases is in the consumption category, and you carry a balance on your card(s), then you are likely abusing your credit.

The Principle

Though credit used for consumption can provide great convenience, if abused, the downside far outweighs any benefit of such convenience. So, avoid using credit for consumption or wasting assets.


Dr. Stephen Cooper is the Director of, a training and support Web Site for both beginning and advanced traders. Over the past four years, Dr. Stephen Cooper has been the primary Stock Market Trainer for Mark Victor Hansen and Robert Allen’s Enlightened Millionaire Institute. He has taught thousands of students his proven trading strategies. He is the author of The Online Option Trader, Windows to Wealth, and The Truth About Money. He has also authored 10 interactive chart analysis tutorial CDs and contributed to several newsletters and publications.