“Debt became a dirty word during the global financial crisis. What debts should people banish immediately, and should any debt be embraced?”

Bah! Here we go again! People trying to make out that debt is either diseased, the devil, or a financial death sentence.

Debt doesn’t cause cancer, it doesn’t wear Prada and it won’t kill you (unless you owe The Mob). Debt is, however, a four-letter word, so be careful how and when you use it.

There are three types of debt – dumb, okay and great (D.O.G.). To find out what type of debt it is, answer these two questions. Is the interest tax deductible? Will the asset grow in value?

If it answers no to both, it’s “Dumb debt”, which is largely credit cards and personal loans. Minimise this debt. This is the sort of debt that Gen Y (ahem, to the left) tends to struggle with.

“Okay debt” answers yes to only one. This covers your home mortgage (which increases in value, but is not deductible) and work-car loans (tax deductible, but falls in value).

If it answers yes to both, it’s “Great debt”. This is investment debt, usually for properties and shares. Far from being a dirty word, this sort of debt that Gen Xers should start Dirty Dancing with – they’ve got the time ahead of them to use it to create real wealth.

And I strongly disagree with those who say a home mortgage is “bad” debt. Who buys their first home by plonking down the purchase price in cash? No-one!

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and an adviser with Castellan Financial Consulting.