Before the Great Recession of 2008 overturned many long-held financial beliefs, it wasnt uncommon for people to differentiate between good debt and bad debt. The thinking was that certain kinds of debt were worth taking on because you come out ahead in the long run. Buying a home and financing a college education were two notable examples. But when home values plummeted and the cost of a bachelors degree soared into five or six digits, those once-safe investments in your future suddenly seemed risky or unattainable. Nows a good time to step back and examine the concept of good debt vs. bad debt and why, in certain cases, acquiring debt may still make sense provided you plan carefully and dont exceed what you can reasonably expect to repay.This simple distinction still applies: Taking on so-called good debt can help boost your credit rating or allow you to buy something that will increase in value over time, whereas bad debt often fuels the purchase of items that are disposable, unnecessary or rapidly depreciable.One of the best ways to build strong credit history is to show lenders you can pay off debt responsibly. Youre more apt to qualify for a mortgage, car loan, or other large debt if youve demonstrated sound repayment behavior. Just remember, carrying multiple loans or high-limit credit cards could harm your rating, since lenders might worry youre taking on more debt than you can repay.Student loans. The average college graduate earns $47,422 a year, compared to $26,349 for high school graduates a difference of $21,073. Using simple math, some calculate the difference in total earnings over a 40-year work life as more than $800,000. However, such estimates dont factor in the crippling student loan debt many graduates face or their inability to find work in a chosen field during difficult times. But still, the unemployment rate among college grads is roughly half that of high school grads 4.5 percent vs. 8.4 percent. College is still a worthwhile investment for many people if they dont go overboard on loans and choose a degree with good earnings and employment potential. Mortgages. Before the real estate crash, homeownership was considered good debt because historically, when someone finally paid off their mortgage, their home was usually worth much more than the purchase price. For many, this probably still will be true, unless they bought during the market upswing or are forced to sell before prices can recover. After all, mortgage interest rates are historically low and interest and mortgage points are still tax-deductible. Just dont buy more house than you can afford. Factor in expenses like property tax, primary mortgage insurance, homeowners dues, utilities and repairs and if you get an adjustable rate mortgage, calculate how high rates could climb. Bad debt. What qualifies as bad debt hasnt changed since the recession, but budget-conscious consumers are paying more attention now. Meals out, excessive vacations, and unnecessary clothing or electronics wants vs. needs all qualify if youre spending beyond your means. Basically, if you cant pay the bill in full within a month or two, reexamine whether its a worthwhile expense; particularly if you dont have at least six to nine months pay stashed in an emergency fund or youre trying to save for a car or home. Jason Alderman directs Visas financial education programs.

Annually, California Associations of Realtors (CAR) heads up to Sacramento. This past week nearly 2,300 realtors ascended onto the capital to meet with respected area legislators and their staff. I was part of a group representing Southwest Riverside County Association of Realtors (SRCAR). Over 50 Board of Realtors from across the state were represented. Governor Jerry Brown came and spoke to us that morning. He delivered a very charismatic speech telling us how important housing plays in our state economy. We could all tell he knew he was talking to a room full of realtors. He, too, could relate how home prices have hurt our economy in recent years. However, he is optimistic and seems to appreciate the tax revenue and job creation a healthy housing market brings to his bottom line. He also went on to say that he has made a couple of good real estate investments himself; despite the fact he, too, has a home in Sacramento that is still underwater. Upon his conclusion we then, as a collected body, marched on to the capitol about two blocks from the convention center for a photo opportunity in front of the capitol building. It was a very patriotic moment for many. Thank God the weather was in our favor. From there, we broke up to meet with our local representatives to voice our concerns regarding some pending issues many were being asked to vote on. Two of the issues are Senate Bill 30 and Assembly Bill 42. Both bills will keep California in conformity with federal law regarding taxes due on the phantom income generated by the forgiven debt from a short sale. Since 2007, a short seller would not have to pay the IRS on this debt. That has also been true in California until 2013. Currently, these bills are in suspense and will languish until a state budget has been pasted. Meaning thousands of Californians are thus being held in suspense. Short sales remain an important alternative to foreclosure for distressed homeowners. We respectfully urged our representatives that these realtor sponsored bills should be activated and passed as urgent matters for the benefit of homeowners throughout the state. This was my third year attending Legislative Day 2013 as part the Realtor Party, as we like to call ourselves. Our purpose is to be a collective voice for the homeowner and their property rights and to tell our elected representatives that homeownership matters. I feel we accomplished that again this year and look forward to going next year.If you have questions regarding available inventory to purchase or the current bank servicers short sale incentives to sellers, contact Mike Mason, Broker/Owner of Mason Real Estate DRE: 01483044, Board of Director of your Southwest Riverside County Association of Realtors (SRCAR), Short Sale (NAR) at Mike@GoTakeAction.com or (951) 296-8887.