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Financial Plan in 10 Minutes Part 6

Really quick example here. Debt is an obligation against future income. What do I mean by that? Good debt versus not good debt. So say your tax rate is 20 percent and you put 2, 000 on a credit card with a 20% rate, 20% rate. It's unbelievable. They're out there right now. If you, if you hold this balance for a year and pay it off in a year, you will effectively have to earn 3,000.

Pre tax, remember you only keep 80%, but pre tax, you'd have to earn 3,000 to pay off this balance. So, what if you took this money and put it towards a course that develops your technical skills and you get a 5,000 raise? That's a win. You've taken debt, you've paid it off. You're because you have greater cash flows, you're earning more income.

What if you took that 2,000 on a credit card and bought the platinum pass to Lollapalooza? Now you'd have a heck of a weekend, no question, but is it really a win? You're going to have to earn 3, 000 over the next year to, pay off that 2, 000 debt. So. Is it a win? So, there's good debt and there's bad debt.

There's productive debt and there's not productive debt. So, next, what's it all about?

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