As a personal finance blogger, I definitely talk the talk. I write about saving up some emergency savings, spending wisely, and contributing to your retirement, even at a young age.

Well, this week marks my 1 year anniversary since I entered the real world and started working. I’ve tracked all my expenses with in my personal budget and I started off my career with $24,000 in student loans and only about $1,000 in savings.

Want to know how far I’ve come? I’m going to break down the past year in a few ways and let you decide if I can walk the walk, too.

Amount Saved in Emergency Savings: $5,000

Amount Paid to Student Loans: $4,900

Amount Invested in Retirement: $9,710

Net Income Last 12 Months (income-expenses): $23,000

% of Income Contributed Toward Net Worth (emergency, retirement, student loans, other savings): 47.5%

Pretty cool, right? I just wish I had been able to break that 50% mark!

The biggest news of all of this is that I officially have a positive net worth! I was pretty surprised to log into Mint recently and see that my cash and investments were greater than my debts. Pretty cool, right?

My take is that if I, a normal person who graduated from college and entered the working world, can get out of $24,000 in debt in just 12 months, anyone can. I didn’t live too much like a college student (it’s been a little cramped, but remember when I got an iPhone?), and setting goals and reaching them has actually been motivating and dare I say fun!

For many people debt is unavoidable. Even some of the wealthiest people on the planet struggle with their finances. One important thing to know is that there is a difference between good debt and bad debt. This post will help you discover how to manage money and ease your way into being debt free.

Some quick tidbits about debt that are frightening:

• Around half of Americans spend more than they earn every year.
• The typical household carries more than $10,000 in credit card debt.
• In the past decade, personal bankruptcies have doubled.

What is Good Debt?

Good debt can be defined as an investment. Good debt like home mortgages, student or business loans are almost always a wise choice. Why? Because they generally do not lose money. Clearly the real estate crash in the United States does not back up that statement, but if you think about it, many of those people were eyeballs deep into ‘bad debt’ prior to the crash and could no longer afford that ‘good debt’. Without question, in five years most property’s will go way up in value.

College or Business loans are also a form of good debt. They are an investment on your future and if properly researched they will pay for themselves many times over. Understanding good debt and bad debt will teach you how to manage money.

Good debt also includes items that you NEED but can’t pay for up front. In these cases be certain you can make the monthly payments before you take on these kinds of debt.

What is Bad Debt?

Bad debt is buying something that loses value or will cost you more money in the future.

“When you buy something that goes down in value immediately, that’s bad debt. If it has no potential to increase in value, that’s bad debt.” (Eric Gelb, CEO of Gateway Financial Advisors and author of “Getting Started in Asset Allocation”).

Other forms of bad debt would be to buy things you don’t need and can’t pay for. On top of that, plenty of people buy these things on their credit cards and end up being un able to make the full payments. If you borrow cash to buy things such as trips, clothes or entertainment and can’t make the credit card payments you will probably pay A LOT more for that item than it’s actually worth.

How Do I Eliminate Debt?

Good debt and bad debt should not co-exist if you know how to manage money. There is an easy way to get rid of bad debt fast so you can begin to chip away at the good debt. This probably seems like it’s against all logic but attempt to do this: pay off debt of lowest value first. This is an excellent way to set goals, witness the your successes and become more motivated to eliminating your bigger debts. Keep in mind you must maintain the minimum payments on everything else. You will see the results and be that much closer to becoming free of debt.

Something we all say is: ‘I wish I could become debt free.” For most that statement is just a wish. For others it feels like an unlikely dream. For some people, becoming debt free is attainable. You can be that person! Remember what causes debt, what solutions exists in managing debt as well as understanding good debt and bad debt. There is a way to start making your debt free wish into a debt free reality.

Best regards,

Brandon

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Brandon Schmid is the president of Angulus Marketing Ltd. and has spent most of his adult life studying money and how it works. His blog will help you pay off your debts and save money at the same time! Say goodbye to your boss forever! A blog that will show you the secrets of the wealthy: http://www.howtomanagemoneytips.com

I was on CreditKarma this weekend and was looking at my credit score. One of my favorite features of CreditKarma is that it shows how your credit situation compares to others.

The “report card” feature shows the important factors in a credit score, tells you how important each is for your credit score, your situation, how you compare to others, the average credit score for each group, as well as a few other metrics to show how meaningful that factor is in comparison to others.

I really love this feature because while a 706 might be just a score, we can take a closer look at our situation, find where we can improve, and take action to improve certain areas.

What I found interesting was that correlation between the factors and credit scores. For the most part, it was not surprising. They have graphs showing that people who make more on time payments have better scores that people who do not. The more times we miss, the more our score will suffer. Makes, sense, right?

Well, once fact that I found surprising was that there was no correlation between certain factors and credit scores. My favorite example is the graph showing the average credit score based on the amount of debt owed. Those with no debt average a 696 credit score, while those with $1-5,000 of debt average a 677 score and those with $5,001-$49,999 of debt average a 640 credit score. (the orange bar is where I fall)

Then, the trend reverses. At $50,000 and above, the more debt accrued correlates to a higher credit score. Actually those with over $150,000 in debt have an average credit score greater than those with no debt!

Why? I have no idea (maybe too small of a sample size? I think they only take into account people who have used CreditKarma). But if you know, leave a comment below!

Readers, do you find this feature from CreditKarma useful? Does it gives you a better idea of your credit situation?