Beau's Blog

Beau’s Review

Jon Hanson’s Good Debt, Bad Debt is a solid personal finance resource both educational and entertaining. The book’s structure is built around several key components:

• Personal Stories: Relatable anecdotes bring abstract concepts to life, making the material accessible and memorable.
• Core Concepts and Mindsets: Hanson highlights essential financial principles and the mental shifts necessary for financial well-being.
• Guidance on Major Financial Decisions: From buying a home to car ownership or navigating marriage, the book offers practical advice for life’s most significant money choices.
• Concrete Systems and Actionable Strategies: Readers are equipped with tools to improve their financial habits, such as record-keeping and debt repayment.

While this book isn’t a magic bullet for financial transformation, it has the potential to make a meaningful impact for those ready to apply its lessons. It’s not a deep dive into complex financial theories or technical investment strategies—so if that’s your aim, you’ll want to look elsewhere. However, for a high-level overview of essential money topics under the theme “conceptually simple but challenging in practice,” it’s great.

For those seeking to improve their financial literacy and willing to take action, the book’s ideas can lead to profound change. Others may find it reassuring, offering validation that they’re already on a solid financial path. Written around 20 years ago, some of the dollar figures and technological references are outdated, but the principles remain timeless and highly relevant.

I discovered Good Debt, Bad Debt while taking an online personal finance course last year. Among the many books recommended, this one stood out as the top choice—and it’s easy to see why. With its blend of practical wisdom, relatable storytelling, and timeless insights, I wholeheartedly recommend it.

Favorite Ideas

Recurring Ideas/Terminology

• These concepts are easy to understand but hard to apply
• Good debt is money that returns more than it costs
• Bad debt does not and is used for consumption
• Bad debt has many consequences: loss of freedom, cash flow, time & opportunities
• Planning and discipline lead to financial success
• Few things affect your life as much as finances
• Two personas: Consumerati vs Econowise
  • Consumerati: People entrenched in consumerism, latest trends and status
  • Econowise: People focused on long term value and what is practical
• Chapters AKA Pillars of Personal Finance
  • Understanding Debt
  • You are your worst enemy
  • Spending/Burn Rate is key
  • Delayed Gratification. Plan and stay the course
  • How to make make use of your past
  • Plan for your life and make work one part of it
  • Big investment/cost: Real Estate
  • Big investment/cost: Cars
  • Tactic: Records
  • Big variable: Marriage
  • How to actually pay off debt

Top Quotes

• Intro: If you embrace sound financial habits early in life, those habits will grow and scale with you
• Ch 1: Awareness can only create a perception of possibilities; you must muster the maturity to take action
• Ch 1: Habits in the long run will control your destiny
• Ch 2: Freedom is found in self discipline. Only through conscious choice can we begin to control our outcomes.
• Ch 2: Does this action/spending move me nearer or further from my goals?
• Ch 3: There is a tendency to confuse income with wealth. Income is like a moving river; wealth is like a lake. Stored income is wealth.
• Ch 3: Even if you feel you can always make more money, you will eventually run out of something else: time
• Ch 5: Will you use your past as a launch pad to be bitter or better?
• Ch 6: There is dangerous ground between knowing and doing-the great purgatory of inaction.
• Ch 6: Chances of success are better with a simple system we always follow rather than a complex plan we sometimes follow
• Ch 7: You will always profit from applied education
• Ch 8: Debt for a car is bad debt. It is a loan on something that decreases in value.
• Ch 9: Don’t start with a budget; start with an actual tabulation of what you are currently spending
• Ch 10: Marriage has a cost in both time and resources. A good marriage creates a dynamic return where the benefits far exceed the costs and is your highest returning good debt.

Beau’s Book Notes & Quotes

Intro

Bad Debt: for consumption because what was borrowed is gone
Good Debt: safely set up cash flow or return in excess of cost; wise use of debt; is an outcome
Character: combination of qualities that distinguish you from others; ability to follow through on a worthwhile objective after the emotion that was present when the objective was proposed is gone
A willingness to plan is closely linked to wealth accumulation
If you embrace sound financial habits early in life, those habits will grow and scale with you

1: The Debt Effects: The invisible hand of debt

Loss of freedom: Current work just to pay debt; lack of freedom to change career; take time to write a book
Loss of cash flow: Cannot save or invest. The past is the past unless you still owe for it
Loss of time: People who are deeply in bad debt are obligated to be at their jobs to repay debts, they have spent their time in advance of it arriving. “Mortgaging your life”. As you grow in wealth and influence you will value time more than you do today.
Loss of opportunities: funds already spoken for me remain silent when opportunity knocks. First rule of enterprise, know solid value when you see it. Second, be able to act on an opportunity when it arises.
Invest financially, intellectually and spiritually
Good D’s: discipline, deferral and discernment
Bad I’s: indifference, immediacy and ignorance
He who asks a question is a fool for 5 minutes, he who does not ask is a fool forever
Awareness can only create a perception of possibilities; you must muster the maturity to take action… Awareness -> Action
Habits in the long run will control your destiny
For merchants who are armed with psychologists, sociologists, surveys and ad agencies, the typical consumer is no more than a cow being milked by their emotions
He finished on time because he started on time
Are you able to change your career or follow your dreams? Or are you enslaved to bad debt? Debt makes cowards of us all
If you have a mind to improve your lot in life, keep in mind that inaction will wear you out
Recommend against direct lending.  Better to buy existing debt secured by real estate. Then you can evaluate payment history.

2: Emotional Hostage: How do I get free from me?

You are strong if you conquer others; you are mighty if you conquer self – Lao Tzu
Author was a sucker for buying a shiny Jaguar (car) even when knew it was dumb. Didn’t ask questions because he didn’t want the truth.
Freedom is found in self discipline. Only through conscious choice can we begin to control our outcomes.
Does this action/spending move me nearer or further from my goals?
It is a terrible feeling to be conned out of your money and after investigation, find you are the culprit.
Emotional decisions > bad debt
Rational decisions > good debt

3: Burn Rate: Spending, Not Income, Determines Wealth

Just as work expands to time allowed, spending expands to money available
It is hard to see spending as the problem when all existing needs and many desires are being met.
There is a tendency to confuse income with wealth. Income is like a moving river; wealth is like a lake. Stored income is wealth.
Burn Rate: money spent each month that does not increase wealth. Taxes are a major part together with food, shelter and transportation.
It’s an accumulation of trinkets and questionable services that leads us to poverty.
Most millionaires earned their money, delayed gratification and controlled their burn rate. Even if you are blessed with a windfall, it is unlikely that without these money management skills you will be able to retain your wealth.
Your burn rate as a percentage of income is the most accurate predictor of your eventual success or failure financially.
Even if you feel your can always make more money, you will eventually run out of something else: time

4: Delayed Gratification: Don’t wait to get it

Perhaps the most Consumerati aspect of today’s culture is short term thinking.
The chief difference between the savage and civilized man is civilized man’s ability to think and plan ahead for another day.
For many, an excuse is better than achievement because an achievement, no matter how great, leaves you having to prove yourself again in the future. But an excuse can last for life.
Reality income: net worth divided by number of years worked… How much you are working for per year.

5: I Don’t know about my past but my future is spotless

Will you use your past as a launch pad to be bitter or better?
One positive aspect of growing up in intermittent poverty; it provided kind of a negative goal setting direction for me.
For me (my past) altered my ability to delay gratification. I was always eager to rush ahead, trying to outpace my white trash past.
Your environment really does affect your life.
Will you use this event to become bitter or better?
I then realized that I had used my dad’s death to become bitter – not outwardly and obviously but there was a subtle undercurrent of bitterness.
Change is within grasp of everyone.

6: What If You Live? Make Work a stage of life-not a life sentence

Financial success is a function of simple math and delayed gratification.
There is dangerous ground between knowing and doing-the great purgatory of inaction. It is here where dreams die, life becomes ordinary and we train ourselves to accept far less than our potential
At the beginning of every (spending) situation, they ask “does this take me nearer or further away from my goals?”
Traits are sticky and scale to make you more of what you are
Chances of success are better with a simple system we always follow rather than a complex plan we sometimes follow
You must have capital to capitalize when opportunities arise
We should tax ourselves, not for vice but for our futures (via automatic transfers). If the government pays itself first from our checks, shouldn’t we at least do the same?
Answers to wealth and happiness lie in a few fundamentals: discipline, deferral and discernment chief among them.
Successful people have these in common
1. They live with people they love
2. They are involved in work they love
3. They operate a financial plan they love because it enhances the people and work they love

Dennis Waitely’s book The Psychology of Winning poem:

There was a very cautious man
Who never laughed or played
He never risked-he never tried
He never sang or prayed
And when one day he passed away
His Insurance was denied
For since he never really lived
They claim he never died

Through the calm lenses of contentment and reason we are able to make wise choices.
Once you have money, time is what you want
Wealth is the number of days you can exist without working

7: Real Estate: Buy 5 Houses – Get One Free

We often don’t see opportunity because it is wrapped in difficult or unattractive packaging
Of all the areas where you can profit from good debt, real estate may provide the most opportunity -if you are willing to become educated about valuation
I am often asked “how can I get my house paid for quickly?” “Sell it” is the short answer but “buy it at a discount first” is the more complete answer
All sellers want 1) most money 2) quickest sale 3) fewest problems. Give them 2/3
You will always profit from applied education
Generally, fresh paint, landscaping and new kitchens and baths have the highest return
If you are living free somewhere, perhaps still with your parents and not saving as much as it would cost to rent a decent place, you are being very foolish
Popular culture teaches us to value comfort over sensibility
The first mortal sin in real estate is paying too much
The second is not recognizing a good deal when it is right in front of you
The third is not getting along famously with people

8: Driving Your Life Away: Are your driving your retirement into the ground?

Debt for a car is bad debt. It is a loan on something that decreases in value.
When I hear of average folks spending 20% of their gross income on car payments, there is little hope for early retirement.
If a car is a fashion statement for you, just admit it and budget for it. I am certainly not against new expensive cars; I have bought a few. All I am recommending is that they be an income appropriate expenditure purchased with the full realization of what else you could have done with that money.
New cars always drop in value.
Car dealers proudly advertise “no money down” as a benefit rather than the detriment it usually is.
1. Don’t buy depreciating assets
2. Don’t eat your seed corn (capital)
3. Remember future value and the story of the $8M Corvette… $23k car for 22 year old
Buy less, drive it longer, invest the difference
Cars are commodities to be used, not investments

9: Do I have Records? My pulse began to quicken

He that despiseth little things shall perish little by little
Poor record keeping will cost you money
If you will do for ten years what most people will never do, you can do for the rest of your life whatever you wish to do
Wealth is not about income; it’s about accumulation and investment
Don’t start with a budget; start with an actual tabulation of what you are currently spending
Once you have a few months of expenses in your record system, you will automatically have a budget. It may not be a good one, but it will be an actual budget, not a budget of where you think you are. From there you will be able to see where you can improve.

10: You Married Who? The Ultimate Good Debt- Maybe

Love, marriage and money are areas of life that are highly emotionally charged. They almost always begin with an appeal to the heartstrings. If you make your love, marriage and money decisions while tethered to reason, the long term benefits can be tremendous.
Marriage has a cost in both time and resources. A good marriage creates a dynamic return where the benefits far exceed the costs and is your highest returning good debt.
Number one cause of conflict in marriage is finances
Take the daughter of a good mother – good nineteenth century advice
Being single is a pleasure compared with having a bad marriage
We marry because we feel that marriage will add something to our lives
When I decided I wanted to get married, I wrote out 26 attributes I highly desired in a wife
If you always do common things you will have a common life

Sample Marriage Checklist – concentrate on what you cannot do without
1 Delayed Gratification
2 Support each other’s dreams, even as they evolve
3 Continuing lifelong learning
4 Independence, not swayed by what’s normal

People will change only if they want to
Get the big rocks in first – marriage checklist things. Before gravel, sand, water of daily life
I know that a lot of guys who get divorced can never find any peace or joy because they have unfinished business with their ex-wives
Don’t worry that your children never listen to you-worry that they are always watching you
You can’t “should’ve done” something, you either did or didn’t take care of business
Tell the kid the truth… More importantly be truthful to yourself
A financially healthy marriage will encourage open discussions of spending, saving, investing, borrowing, tax planning, bequeathing and charitable giving. 

11: Debt Warfare, When Push Comes to Shove

Cut unnecessary expenses, pay off small debts first and then use that cash flow to pay off increasingly bigger debts

Conclusion

The concepts of Good Debt, Bad Debt are easy to understand but hard to apply.
Financial success is simple and daily actions decide the realities of tomorrow.
There are few things, that affect as many areas of your life as do your finances.
Understanding the concepts of debt effects, emotional management, burn rate and delayed gratification can change your life.