Someone very wise once said that death and taxes are the only two things people can be certain of. But if recent trends are any indication, it’s starting to look like a third unsavory item could soon be added to that list of life’s ‘givens’: Debt.

Last month Stats Canada revealed that our debt-to-disposable income ratio rose to a high of 171.1% in the third quarter of 2017, meaning that for every dollar of household disposable income Canadians make they actually owe $1.71 in credit market debt. And this was preceded by an embarrassing announcement from the Organization of Economic Cooperation and Development (OECD): Canada’s household debt levels are the highest in the developed world. Oh Canada!

We clearly need a dose of debt help. But before you resolve to swear off debt forever, ponder this: is all debt bad?

Good Debt vs. Bad Debt

Not only is there such a thing as good debt, but going into debt can sometimes be a fiscally smart choice that helps carve a path for a more secure financial future.

Generally speaking, you can determine if debt is good or bad by how it affects your personal bottom line. If going into debt adds value to your overall net worth or will be a future asset, it’s considered good debt.

Mortgages and higher education costs are often cited as examples of good debt. Mortgages are positive examples of debt because owning a home increases your net worth and a property is an asset that should continue to grow in value as the years pass. Likewise, pursuing higher education is an investment in your future that should help you secure a higher-paying job.

Bad debt, on the other hand, is any item that will decrease in worth and that has no long-term value. That $1000-dollar, 40-inch retractable mirror ball you charged to your credit card may make your living room the house party spot of the season, but it’s still considered bad debt.

Fiscally speaking, smiles and happy memories do not increase your financial net worth. That’s the problem with acquiring bad debt—it often feels great. Electronics, expensive designer clothing and luxury automobiles are all examples of items whose value depreciates exponentially the longer you own them. Think twice before you put those kinds of purchases on your credit card.

The Grey Area

Of course, now that I’ve explained the clear divisions between good and bad debt it’s time to blur the lines a little. While the above examples are solid guidelines to follow when you’re trying to decide whether to go into debt or not, the reality is not so black and white.

For example, a mortgage is not always smart debt. If you don’t have enough savings for a healthy down payment and are not financially secure enough to ensure you can make your mortgage payments each month, interest rates on your dream home can put you in the poor house. As housing prices fluctuate in an uncertain economy, owning a home is no longer the unassailable sound investment it once was. For some, renting rather than buying is a much more practical and budget-smart solution.

And what about that hallowed university degree that used to promise a long and lucrative career? Thanks to things like international trade and rapid advancements in technology, the employment landscape has undergone some dramatic shifts over the last couple of decades. Having a degree—even at a Masters or PhD level—especially in “soft subjects,” is no guarantee of secure employment. That’s not to say you shouldn’t pursue a PhD in “Minor French Poets of the 14^th Century” if that’s what you truly love and are passionate about. Just be sure that you take on the debt with your eyes open and that you fully balance the risks versus the possible rewards.

Good Debt Gone Bad and Vice Versa

In the end, there are no easy answers when it comes to debt. Good debt isn’t always good and bad debt isn’t always bad. Take it from someone who knows. I spent three years and $30,000 pursuing a law degree, which would generally be considered good debt as I had a strong chance of finding employment with above-average pay. Upon graduation, however, I realized that I had no real interest in law and that I would be a very unhappy lawyer and a much happier writer. It was a priceless but costly epiphany, and that 30 grand of good debt went bad very quickly.

If you’re in over your head with bad debt and want some actionable debt advice, the good news is that there are some sound consolidation tools that can help:

• Balance transfer cards are good credit cards for bad credit. They allow you to transfer balances owed from multiple high-interest cards and loans onto a single card with a low promotional interest rate. Said interest rate is usually between 0%-2.99%, and lasts around six months to a year, after which it increases. This provides a window of time to pay off debts without accumulating more from high interest. Just be sure that you make the minimum monthly payment each time, otherwise the interest rate on the balance transfer card could increase.
• Another option is a credit card consolidation loan, which, like a balance transfer card, allows consumers to pay off different high-interest debts and focus on one single payment instead. Just make sure that the consolidation loan offers a better interest rate than those of your existing debts, and be mindful of any fees that you might incur with the loan.

Ask This Before Major Purchases

Dealing with debt comes down to having a realistic understanding of what you can take on financially, and making level-headed appraisals of assets’ chances of increasing or decreasing in value. Good, bad or ugly, all debt is a drain on your bank account. So before you buy that retractable silver mirror ball, ask yourself if it’s really necessary. And if it is, it’s always a smart idea to pay it off as quickly as possible.

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