Just Say No To Debt
Editor’s Note: This is one in an infrequently recurring series on personal finance and my plan for getting ours in order. I am not a financial planner, but I think this is common sense advice that anyone can follow, no matter your financial situation. Don’t sue me if you try it and it backfires.
It’s important to understand that nearly everyone in the United States has debt of some kind. You’re not alone. And if you’re overwhelmed by the amount of debt you’re carrying, you’re also not the only one out there.
Think about your debt. Do you have a credit card? Several credit cards? Student loans? Loans for other things, like cars or a boat? Do you own your house outright, or is it mortgaged? Now think about the people you know. That guy down the street with two really nice SUVs and the 58″ plasma - do you think he paid cash for all of that? If so, good for him, but chances are he didn’t.
Debt is neither good nor bad. That sounds really touchy-feely, but it’s true. Buying things on credit gives us the opportunity to live a good life and enjoy things that you wouldn’t be able to pay cash for all at once. There’s no way I could have come up with the money to buy my house with cash, at least not within the next 10 years. For one, I don’t have the kind of discipline that would make me able to save for that long, but also, the availability of a mortgage makes it unnecessary.
Having said that, however, while the availability of debt may be convenient, it’s not always a good thing. It’s VERY easy to overextend yourself with so much debt that it gets out of control.
I see some forms of debt as not as bad as others. Student loans and mortgages, in my opinion, are not as damaging financially as consumer debt. Consumer debt is debt that you take on to pay for STUFF. (I don’t consider your house to be part of that STUFF, since you need to have a place to live.) Student loans truly are an investment in your career and future. Study after study shows that a college degree is the ONLY trait that separates high earning people from low earning people. Family status or situation, whether you were from a single-parent or nuclear family, none of that matters when it comes to your lifetime earning potential. As I stated before, while real estate is NOT a guaranteed money-making investment, you need to have a place to live anyway, and it’s nice to own your own house.