So I’m sure that you already know, and that countless people have told you, that debt is “bad,” to avoid debt, and that it will “ruin your life,” and so on and so forth. However, sometimes debt can help you reach your goals.
According to the blog, “The Good, The Bad, And The Indebted,” on the website $alt, there is such a thing as "good” debt, as opposed to “bad” debt.
The blog says, “Your lenders consider 'bad' debt to be not getting paid back their money. ‘Good’ debt was when they received their money with interest. Of course, things aren’t nearly that simple.”
It goes on to say that rather, “good” debt is an investment that generates long-term value. You “grow” your money…and invest in your future! (Student loans are an example of this.)
Another example of good debt is a home mortgage, “and anything else that has the potential to grow.”
An example of acquiring “bad” debt would be buying items that “have little or no return, despite a hefty price tag,” like electronics, clothes, and eating out.
These items (or eating out) will never go up in value after you spend your money on them.
Just be careful and selective of what you choose to spend your money on, and put lots of thought into what you do decide acquire debt over (if you do decide to).
Here are things to keep in mind when you find something that you feel compelled to buy:
- Do you have cash to pay for this, or only credit? If only credit, can you wait until you have cash?
- If you decide to use credit to buy something, remember that if you pay it off over time, it will acquire interest.
- How long will it take you to pay it off, and what will its value be to you at that time (will it be a car that enables you to get to work, or another device that will have a newer version by then that you’ll want)?
- No matter how you pay for things, always track what you spend your money on!
Most importantly, when you make purchases with credit think about the difference between whether those purchases will benefit you in the long run, or just add to your stress because they are “bad” debt.