Debt can be a huge burden so how do you survive bad debts and even bankruptcy?

I don’t believe in bad debt. I believe in the “DOG” of debt. There’s “dumb”, “okay” and “great” debt.

People use dumb debt to buy the stuff that doesn’t make any financial sense – stuff that is neither a tax deduction, nor does it increase in value.

This is almost anything bought on a credit card, interest-free from a store, or that comes on wheels.

(Okay and great debt have elements of either being a tax deduction, or increasing in value, preferably both.)

Dumb debt is dangerous. Furniture debt and car loans are one part of it. But it’s credit cards, with limits that can slowly creep up, from finance companies or the retailers themselves to make sure you can buy their products on the spot, that get most people into trouble.

Unfortunately, this sort of debt requires you to exercise self-control. You can’t trust banks and finance companies to act in your best interests.

There’s only one way to survive dumb debt, if you get caught in a debt spiral. Slowly fight you way out of it.

Choose a debt and pick on it, like a bully. Slug every cent you can off the debt. When you get the debt down a bit, call the bank and get the limit reduced (if it’s a credit card).

Bankruptcy, for anyone interested in becoming financially successful, is not an option. It hangs around your neck like an albatross for years, stopping you from doing a lot of things, such as getting debt to buy yourself a home.

If you get really caught, see a financial counsellor.

Bruce Brammall is the principal adviser with Bruce Brammall Financial (www.brucebrammall.com.au) and author of Mortgages Made Easy.