Debt is usually looked at in a negative light, and for good reason. A pile of debt can be a huge burden that can take years to pay off. But is all debt bad? Surely not. Here are some good and bad reasons to take on debt…
GOOD: You just bought your first house– Most people don’t pay cash for a house, so if you want to purchase one, you’re going to have to take on a mortgage debt. The beauty here is that you can pay off that debt as part of your housing budget and in the end, you’ll own a house.
BAD: Immediate gratification – You may be tempted to take on some debt in exchange for something that provides immediate gratification (like a trip or experience) but after it’s over, all you’ll have left is the debt. It’s probably a good idea to save up for any pricey experiences you’d like to have.
GOOD: Starting a business – Maybe you live in a small town that’s growing and you have an idea for a small business or restaurant that is sure to be a hit. As long as you’re confident that the business will be profitable, it makes sense to take on some debt to get the company on its feet.
BAD: Buying “things” –With the exception of a house or a car, almost anything you’d want to buy won’t really hold its value over the long term. You’ll probably hate the fact that you’re still paying for something that no longer has value to you.
GOOD: Higher education – School isn’t cheap so thankfully student loans are available. Education is your gateway to your dream job or merely a higher paying one. There are tons of benefits to getting more education, so trading a little debt for it is probably worth it.
BAD: Living above your means – Whether it’s due to a change in jobs or from poor budgeting, if you’re living above your means, you’re probably accruing a little debt here and there. It may not seem like much, but it will add up and then you’ll have to make some major adjustments to your spending habits if you want to get free of it.