“When you live on cash, you understand the limits of the world around which you navigate each day. Credit leads into a desert with invisible boundaries.” -Anton Chekhov

Debt Free!Almost Debt Free is a bit of a misnomer for this new series that I will publish each Tuesday into the summer. I’m actually looking forward to running into the arms of mortgage debt and a small business loan. It’s credit card debt that I’d like to see kicked to the curb, which I’m four months from successfully divorcing.

I will not lie. My debt reduction experience was a tumultuous undertaking. I’ve worked long, strenuous hours to make more money; I’ve strained friendships with my unavailability; and I’ve had to completely re-evaluate my priorities, my interests, and an overall understanding of myself. I wouldn’t recommend the militant approach I applied to debt reduction. It is the last year of being in my twenties, and I essentially had a freak out several years in the making. I can’t complain really. It was vitally important for me to be prepared to jump into my thirties with a brighter financial future, and that’s what I have accomplished.

It’s sad that my story is rare, and I don’t think it should be. Although it irritates me when others preach the “if I can do it, anyone can” drill we’ve all heard before, I’m going to drop that line here as well. I grew up a spoiled brat with no appreciation for the value of a dollar, and my attitude about work and earning money was bad enough to make me the most unsympathetic of characters. Somehow, I stumbled into debt and crawled out of a potentially gloomy picture entirely on my own.

We all have different reasons for how we got into debt, but as Tamara Draut points out in her book Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead, those of us born between 1971 and 1987 face greater financial barriers to transitioning to adulthood than the Baby Boomer generation before us. With backbreaking education and housing costs, diminishing work and tax benefits, and easy access to credit cards, it’s plain to see how credit card debt carried by the average American is $8,562.

Here’s my intent for this series. I’m not going to give financial advice, because I’m not qualified to do that. I’m going to frankly chronicle my last days of credit card debt, and I’ll share what I’m doing to prepare for life after debt. It’s my hope that others will see it is absolutely possible to take control of their financial situation and get to a similar position as me. Whether you’re deep in the red, or already in the black, the topics I will cover have something for everyone.

To kickoff this series, let me distinguish between good debt and bad debt. It’s the bad debt I want to identify and get rid of, and it’s the good the debt I want to manage slowly but effectively while saving for other things.

Experts will tell you, in the most helpful way they can, not all debt is bad, not all debt is good, but it’s a little more complicated than that.

Let’s clarify the distinction with my case. I have gone back up to $4,000 in credit card debt, all but $500 of which is locked in at a 0% interest rate relatively soon to expire. My student loan debt is just under $10,000 at 6.8% interest. I have no mortgage, no car payments, and low monthly utility expenses. What’s the good debt? What’s the bad debt?

Bankrate.com (via MSN Money) provides some great rules of thumb.

Good Debt: An investment that creates value and builds wealth (ie, student loan, home and business loans).

Bad Debt: Purchase that goes down in value or has no potential to increase in value (ie, disposable or durable goods).

That’s pretty easy to grasp, but I’ll echo the experts and say it’s a little more complicated than that. My student loan isn’t entirely good debt because half of it was for a random semester of school I did after graduating college to break from the rat race. That creative writing semester hasn’t really added much to my earning potential. I learned the hard way that I should take education and career a bit more seriously.

Also, I was grim to discover this past tax season that a significant portion of interest I paid on my student loan in 2006 could not be deducted because the benefit gets phased out for my income range, a tax pitfall I wish were more widely available knowledge. Those who made more than $65K in 2006 didn’t even get to deduct any student loan interest.

Good debt falls into a bit more of a gray area. Take current real estate market conditions, for example. Nina pointed out that many sub-prime borrowers are hurting significantly from their home loans, while I discussed that home values are stagnating or even depreciating in some parts of the country. Auto loans are another gray area. It’s a necessary expenditure for some, but there is risk for driving too much car. I’ll talk more about managing good and gray debts later in this series.

Thankfully bad debt is pretty clear. For me, and this is my personal opinion, but credit card debt simply sucks. It’s bad debt, and it’s best to live without it.

Most of us already know that partial monthly payments and high interest rates are what have kept us in debt. I’m not advocating life without credit cards, however, because it’s not wise. We need a credit card to develop and maintain a credit history that shows creditors we are responsible with money, as Paula discusses. It just comes down to managing life with credit cards and staying out of bad debt as your money goes toward building wealth. That’s the focus of this series, and that’s all there is to it.

Stay tuned for next week where I talk about how I got organized to pay down my debts, and the risky debt ratio I’m riding that you definitely want to avoid on the debt reduction path.