The concept of good debt can sound completely foreign to most people. We are trained that having debt is a terrible thing. People don't talk about it with their friends, and hide how much debt they have from their spouses. In general debt is bad, don't get me wrong. It locks you into a job you don't like, you miss out on visiting friends because you can't afford it due to the crushing debt payments. 

Let's start with the bad kind of debt just to get it out of the way. Bad debts are what everyone immediately thinks of. It's the credit card balances that never seem to go away, the personal loans that you forgot what you even used it for and definitely pay day loans. All these types of debt have a few things in common. Firstly they are all associated with high sometimes crushingly so interest rates. Credit cards can top 25%, and payday loans on an annual basis can be on the verge of criminal at 400%. The second thing they all have in common is that there is nothing you get in return for carrying this debt. Having a credit card balance means you have lived beyond your income. It's like driving at night faster than the headlights of your car can shine. You're just hoping that everything will be ok. 

Good debt on the other hand is associated with education, mortgages, business loans etc. When you take out student loans what you are doing is investing in yourself. You plan to get a degree and that degree will help land a higher paying job which will more than make up for the cost of the education. A mortgage is debt on a fixed asset. Your home can be an investment, more on that in rental income and retirement planning, but it also offers security, a place to raise a family and more. In short a home isn't a consumer good the same way eating out at a nice restaurant is a consumer good. 

If you're in debt the number one financial goal should be paying down high interest rate bad debt. If you want to be truly debt free then focus on the good debt second. There are even some situations where it makes sense to hold on to your good debt and instead focus on investing. For example if your mortgage rate is 4% and your 401(k) is earning 8% you come out ahead by investing due to the rate triage. 

Talking to a financial advisor to go over your specific situation can be really helpful when developing a budget and a plan to get out of debt and set yourself up for retirement or whatever other goal you may have.