"Neither a borrower, nor a lender be," cautions Shakespeare in Hamlet. The reality is, most of us carry debt. From a money management standpoint, that is not necessarily bad. Sometimes debt is good. Sometimes it's downright ugly. The key is to carry the right kind of debt, and not too much of it.
Good debt is generally debt that can provide a long-term financial payoff. An educational loan, either for your children or perhaps career education for yourself, is a good example. The improved earning power from the education should more than pay back the cost of the loan.
Mortgage/real estate debt is another "good" debt. To begin with, few consumers can afford to pay cash for a home. Also, a mortgage is good debt in the sense that a home is considered an investment, as most homes will appreciate in value over time.
Debt for business growth, expansion or working capital is also “good” debt especially for established businesses; the same cannot be said about financing a startup with debt.
This tends to be short-term debt in which the loan lasts longer than the item you bought with the debt, and for which there is no financial payback. Most credit card debt falls into this category. People pay for everything from dinner to toys to clothing to vacations on their credit card and they're still paying for them long after the vacation is done or the toy is broken. Also, credit card debt tends to be very expensive-18 percent or more is common.
Loans for furniture, appliances, cars and other personal needs also can be fairly expensive, though usually not as high as credit cards. Save for these items, whenever possible, and pay for them in cash.
Some people would lump credit cards in this category especially in this part of the world. But I reserved this category for the really expensive debt that comes from what's commonly called "fringe banking." This includes "payday loans," interest on pawned household items and furniture (Shylocks). Interest rates for some of these loans can run 25 percent to 200 percent or more.