I just finished reading Margaret Atwood’s new book Payback, a sobering look at our relationship with debt -— past, present and future.  While many of the literary and historical references were over my head, her point that our relationship to debt comes with serious emotional baggage and that there is a day of reckoning seemed very apropos to the times we are in.

In today’s financial literature, a distinction is often made between “good debt” and “bad debt,” and although my preference is for no debt, this is a good time for us all to consider our own feelings about debt and our “payback” strategies.

Good debt is the debt you incur to purchase an asset, like a house or investments.  And ideally these are appreciating assets over the long run.  So while a car loan has an asset attached to it, it is depreciating, so something to be cautious about.

Bad debt is the debt that comes from buying “stuff” and living beyond your means.  If you are running a balance on your line of credit or your credit card that originated from purchases that you didn’t have the money for, then it’s time to take a close look at your cash flow and to make more money or to reign in your spending.

“Ugly debt” can be either good or bad debt spinning out of control.  If you aren’t sure how much debt you have, if you have balances on multiples credit cards, or if you are using your line of credit to pay off your credit card or your mortgage then take a deep breath, get honest with yourself, sharpen your pencil and make a payback plan before it’s too late. — Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the co-founder of the Women’s Financial Learning Centre.