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Lesko Financial: Eliminating Debt is a Positive Goal

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Bryanna:  Many people pursue a goal of becoming debt-free, but some who get there later voice regrets. Greg Lesko of Lesko Financial explains.

Greg: Eliminating debt is generally a positive goal. If you don’t have to pay a large chunk of income towards debt, it frees up dollars you can save and invest to build wealth. But some people who get to “zero debt” say they became so focused on paying it off that they neglected the rest of their quality-of-life.    

Bryanna: What kinds of sacrifices do they regret?    

Greg: One woman paid off a $28,000 student loan in just three years while earning only $30,000 a year. But later she wished she’d spent some of that money to boost her career such as attending industry conferences and on enjoying life along the way. There can also be an obsessive quality to becoming debt-free.
The same woman said she was so focused on not spending money on anything else that she once argued with herself for 20 minutes over whether to pay one dollar for a RedBox video.  

Bryanna: How can someone find a sensible balance?  

Greg: It’s important to distinguish between “good debt” and “bad debt.” A fixed-rate mortgage with payments you can afford is “good debt”--the interest is tax-deductible and rates are relatively low. Affordable student loan payments can also be considered good debt. If you stay current on these payments, other financial goals can be more important--such as an emergency fund and saving for retirement. “Bad debt” would be high interest credit cards which you should try to pay off as quickly as possible.