good debt is that which is invested in a worthwhile asset. an example of good debt would be student loans, or a home loan.
bad debt is consumer debt. these are your credit cards.
when you sit down and look at your own financial situation evaluate your debt. what's good? what's bad? and what's the worst (highest interest rate)?
you want to categorize your debt and focus on the bad debt first.
likely, bad debt has higher interest rates and you don't really have anything to show for that debt-other than the killer leather jacket you got, or those boots you are afraid to wear outside of your apartment because you spent so much on them-not that i have ever done that :/...
your good debt will generally get you tax breaks as well. you will be able to write off the interest you paid on things like student loans-so keep track and keep your eye out for that statement around tax time for what you paid for the previous year in interest.
when i started the lockdown i had a little over $800 in credit cards, my car, and my student loan.
i decided to pay off that credit card debt (my bad debt) in the first month of the lockdown. it made the most sense. it had the highest interest rate and was my only bad debt.
in month two i focused on my student loan debt. i am putting all extra debt payments on my student loan until it is paid off because it's interest rate is significantly higher than my car loan interest rate-6ish% compared to 2.95% on my car.
once the student loans are gone i will concentrate all of the extra payments on my car loan until that bad boy is long gone as well. i'll likely sprinkle some of that 'extra money' into my savings as well.
i know us girls love the bad boys, but in this situation-they are just bad so get rid of em.