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The Two Faces of Debt

Understanding Good Versus Bad Debt Can Help You Make Smart Financial Moves

Credit card debt is a huge challenge for many people. According to Debt.org, Americans owe $986 billion on credit cards, surpassing the prepandemic high of $927 billion. While credit card debt is considered “bad debt,” it’s important to understand other types of debt and the important role it can play in your financial plan.

Good Debt: A Building Block for Growing Your Wealth

Good debt refers to borrowing money for investments that have the potential to grow in value or provide future benefits. It focuses on investments that enhance your financial position in the long run. For example:

  • Taking out a loan to finance your education can increase your earning potential and open up career opportunities.
  • Using a mortgage for a reasonably priced home can help build equity and provide shelter.
  • Taking a loan to buy a used car in great shape that enables you to get to and from work. However, going into debt on a luxury vehicle is going to be mostly bad debt.
  • Getting a home equity loan to do repairs or upgrades on your residence.

Bad Debt: A Stumbling Block To Achieving Your Financial Goals

Bad debt involves borrowing money for purchases that quickly lose value or do not generate income. Credit card debt that piles up from impulsive shopping sprees or luxury vacations falls into this category.

Whether you are considering good debt or bad debt, you want to be wise about your borrowing practices. Here are some key rules to follow when borrowing responsibly:

Necessity. Evaluate whether the debt is for an essential need or an investment that will improve your financial situation in the long run.

Affordability. Avoid taking on debt that stretches your finances to the breaking point. You may want to evaluate your debt-to-income ratio:

  • The debt-to-income ratio compares an individual’s monthly debt payment to their monthly gross income.
  • According to Investopedia, 43% is the highest debt-to-income ratio a borrower can have and still qualify for a mortgage.
  • Lenders prefer a debt-to-income ratio that is lower than 36%.

Research and Compare. It’s a good idea to shop around for the best loan terms. Compare interest rates, fees and repayment terms from different lenders or financial institutions to secure the most favorable terms and save money in the long run.

Repayment. Stay on top of your repayment obligations and make payments on time. Late payments can lead to additional fees, higher interest rates and a negative impact on your credit score.

Communication. If you’re facing financial difficulties or anticipate challenges in making payments, reach out to your lenders proactively. They may offer assistance, such as revised repayment plans or hardship programs.

 

 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

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Peter M. Babilla, CFP®, CRPS®

SENIOR WEALTH ADVISOR

Peter Babilla brings 40 years of experience in investment management and fiduciary* financial consulting to Vertex Planning Partners, LLC.

Pete graduated from Indiana University in Bloomington, Indiana with a Bachelor’s of Science in Finance.

He began his career in 1983 with a focus on institutional fixed-income portfolio management, primarily working with community banks. After a decade serving institutional clients, Pete shifted his focus to working with individuals, families and business owners, providing guidance and education in all areas of Wealth Management.  Among his areas of focus are accumulation and retirement planning, investment management, risk management, and estate and wealth transfer.

Pete’s planning philosophy allows him to create a personalized program for clients, based on their own unique goals and circumstances.  The extensive investment and planning platform offered by Vertex enables him to create a highly customized program, tailored to each individual client.

Pete and his wife Suzanne have two children, and have resided in Wheaton, Illinois for the past 30 years.  He enjoys golf, reading, and traveling with his family.  Pete gives back as a past Board Member of the Epilepsy Foundation of Greater Chicago, where his focus is on improving the lives of those living with epilepsy.

Pete works as fiduciary for his clients and holds the CERTIFIED FIANANCIAL PLANNER™ (CFP®) designation and the Chartered Retirement Plan Specialist (CRPS®) designation.

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JUSTIN J. D'AGOSTINO, CFP®, ChFC®, CRPC®, AIF®

PRIVATE WEALTH ADVISOR

Justin D’Agostino joined Vertex Partners in 2019 and is a Private Wealth Advisor that serves a select group of business owners and affluent families. He specializes in investments, financial planning, and succession planning. His interest and knowledge in providing comprehensive financial planning and wealth management services to clients was sparked when he worked at a boutique tax and wealth management firm in Michigan. He has nine years of experience in the financial services industry, and his mission is to provide every client with targeted, comprehensive financial advice and to help them implement customized strategies designed to move them closer to accomplishing their unique goals.

Justin attended Hillsdale College where he earned his BA in Accounting and Financial Management and was a member and captain of the football team. Justin is a CERTIFIED FINANCIAL PLANNER™ Professional, holds the Chartered Retirement Planning Counselor™ and Accredited Investment Fiduciary™ designations.

Justin and his fiancé, Alexandra, reside in Chicago, Illinois. He is an avid sports fan and enjoys golfing, playing soccer and spending summer weekends with his family.

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Scott A. Sandee CFP®, CIMA®, CPWA®, CEPA

MANAGING PARTNER

Scott Sandee brings over 20 years of experience as Managing Partner. He is responsible for leading the firm’s efforts in assisting middle-market business owners and seven and eight-figure families to plan and realize financial goals based on their unique aspirations and situations.

With a privately held family business background, Scott has helped owners prepare for and execute a successful transition. In addition, he works with business owners and their advisors to develop financial strategies to maximize sales proceeds and minimize future taxes.

Before joining Vertex, Scott served in financial planning and investment strategy roles at Oxford Financial Group, Capital Group, and The Northern Trust Company, working with Chicago’s HNW/UHNW families clients.

Scott holds the Certified Financial Planner®, Certified Private Wealth Advisor®, Certified Investment Management Analyst®, and Certified Exit Planning Advisor designations. Scott earned his B.S. in Computer Science from Northern Illinois University, and his family resides in Wilmette, IL.

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Julie Hupp CFP®, MBA

PARTNER

Julie Hupp, CERTIFIED FINANCIAL PLANNER™ professional, has worked in the accounting and corporate finance field since 1987. She began her career as a CPA with Deloitte & Touche, specializing in the financial needs of small businesses. Then spent the next 13 years in corporate financial planning and business development at Baxter and TAP Pharmaceuticals. Recognizing her passion for personal financial planning, Julie started her business in 2006 where she focuses on comprehensive financial planning strategies and implementation.

Julie graduated from University of Illinois with a BS in Accountancy. She received her Master’s in Management with a concentration in Finance from Northwestern University’s Kellogg School of Management in 1994.

Outside the office, Julie is the co-founder of the 12 Oaks Foundation, which has merged with Cal’s Angels, and is a former Board member. Julie enjoys cooking, reading, running, triathlons and doing almost anything outdoors. A great weekend is spending time with her husband and two adult kids boating at their lake house in Wisconsin.

Steven P. Franzen, CPA, PFS, CGMA

MANAGING PARTNER

Steven P. Franzen, CPA, PFS, CGMA is a public accountant and consultant with more than 23 years of experience helping individuals and businesses reduce their tax liability.  He began his career under the guidance of Patrick M. De Sio, CPA, CGMA and in 1996 became Mr. De Sio’s partner in De Sio, Franzen & Associates, Ltd. Steve’s expertise include entity design, complex tax strategies and multigenerational wealth transfer.  As Managing Partner, Steve conducts his practice under the philosophy that the client’s investment in their CPA should yield a return on that investment – most of the time that return is realized when working with clients on planning for their future. In an effort to increase the planning capabilities of the firm,  Steve formed Vertex Accounting Partners, LLC to ensure their guiding philosophy will continue well into the future.

Steve is a certified public accountant and has earned the professional designations of Personal Financial Specialist and Chartered Global Management Accountant.  He is a member of the American Institute of Certified Public Accountants and the Illinois CPA Society.  Steve earned a B.S. degree in accounting from Millikin University.  He and his wife Kristie live in Sugar Grove, IL with their three children.

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Gregory P. Benner, CPWA®, CFP®, CLU®, CHFC®, AIF®, RMA®

MANAGING PARTNER

Gregory P. Benner, CPWA®, CFP®, ChFC®, CLU®, AIF®, RMA® has over twenty-two years of experience as a financial advisor. Greg’s practice is based on developing holistic financial plans that help his clients integrate sophisticated retirement, tax, risk management and estate planning strategies into an actionable plan, then stay the course as their behavioral coach.

Prior to founding Vertex Planning Partners, LLC, Greg spent four years as a founding partner of a Registered Investment Advisory firm affiliated with LPL Financial. He also spent seven years with JPMorgan Chase as a Senior Financial Advisor and was a Financial Representative with Northwestern Mutual Life.

Greg holds the Certified Private Wealth Advisor® designation and is a CERTIFIED FINANCIAL PLANNER™ Certificant. He also holds the Chartered Financial Consultant®, Chartered Life Underwriter®, Accredited Investment Fiduciary™, and Retirement Management AdvisorSM designations. He earned a B.S. in Finance from Miami University.

He and his wife Lindsey reside in Naperville, IL with their daughter and twin sons.

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Michael D. Bellis, CFP®, CLU®

MANAGING PARTNER

Michael D. Bellis, CFP®, CLU® began his career as a financial planning professional in 1994. His practice is centered on holistic financial planning, astute risk management strategies and empirical, research-driven portfolio construction. He began his career in partnership with his father under the name Bellis & Associates. Together, their practice and reputation for excellence dates back more than 40 years and includes multiple generations of the same families. After his father’s retirement several years ago, Mike continued to build a client-centric, consultative practice before forming Vertex.

Mike holds the CERTIFIED FINANCIAL PLANNER™ certification and is also a Chartered Life Underwriter. He has been an active member of both the Society of Financial Services Professionals and the National Association of Insurance and Financial Advisors. He earned a B.S. in Business & Marketing from Illinois State University. Mike is a lifelong resident of Naperville, Illinois. He and his wife Tanja have three children.

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