Jeff at SustainableLifeBlog recently wrote an interesting post on how his view of debt has changed over the past two years. It got me thinking.
There seems to be two different camps of thinking when it comes to debt. There are those who hate it and want it all gone and there are those who use debt as leverage. I'm a huge believer that not all debt is bad and in fact if it is used correctly it can help us increase our wealth.
There are three types of debt that I've had and so I'll only speak to what I know: credit card, student loans and mortgage debt.
I consider credit card debt as bad debt. Not only are interest rates high on credit cards, but often credit card debt gets racked up because people are not living within their means.
I think student loan debt can go either way. Our world requires a knowledge-based workforce and you gain the credential you need for many jobs by going to college. I know I make a lot more money now than I would if I didn't have my higher degrees. However, if you are going six figures worth in debt to get a degree, you may want to step back and decide if it is really worth that much debt. While costs are rising everywhere, there are always other options. I've made all my final decisions about schools based on money and I still believe these were the right decisions. I have student debt, I'm working hard to get rid of it, but I'm thankful for what this money allowed me to accomplish.
Finally, there is mortgage debt. If leveraged the right way you gain a home and you build equity. The recent financial crash taught us we shouldn't take out the biggest mortgage we can and we shouldn't necessarily purchase the biggest house we can afford. However, if you have the money for a down payment, purchase a home that allows you to have payments that fall within your means then I think taking advantage of mortgage debt is a fantastic way to build wealth. One day that house will be paid off, and in the meantime you are building equity.
I currently have student loan and mortgage debt. I've decided that I'm sick of my student loan so I'm working hard to pay it off over the next two years. However, I'm doing the opposite with my mortgage. I'm trying to refinance to a lower payment so that the rent will cover my costs. Then once the market comes back I'll sell and hopefully make enough of a profit that the money can be used as a down payment for a house for the husband and I. In the meantime, I'm thankful that my apartment is not under water and that every month I'm building up my equity.
Debt is complicated and you have to figure out how much you are comfortable carrying.
picture by Brad_Chaffee
There seems to be two different camps of thinking when it comes to debt. There are those who hate it and want it all gone and there are those who use debt as leverage. I'm a huge believer that not all debt is bad and in fact if it is used correctly it can help us increase our wealth.
There are three types of debt that I've had and so I'll only speak to what I know: credit card, student loans and mortgage debt.
I consider credit card debt as bad debt. Not only are interest rates high on credit cards, but often credit card debt gets racked up because people are not living within their means.
I think student loan debt can go either way. Our world requires a knowledge-based workforce and you gain the credential you need for many jobs by going to college. I know I make a lot more money now than I would if I didn't have my higher degrees. However, if you are going six figures worth in debt to get a degree, you may want to step back and decide if it is really worth that much debt. While costs are rising everywhere, there are always other options. I've made all my final decisions about schools based on money and I still believe these were the right decisions. I have student debt, I'm working hard to get rid of it, but I'm thankful for what this money allowed me to accomplish.
Finally, there is mortgage debt. If leveraged the right way you gain a home and you build equity. The recent financial crash taught us we shouldn't take out the biggest mortgage we can and we shouldn't necessarily purchase the biggest house we can afford. However, if you have the money for a down payment, purchase a home that allows you to have payments that fall within your means then I think taking advantage of mortgage debt is a fantastic way to build wealth. One day that house will be paid off, and in the meantime you are building equity.
I currently have student loan and mortgage debt. I've decided that I'm sick of my student loan so I'm working hard to pay it off over the next two years. However, I'm doing the opposite with my mortgage. I'm trying to refinance to a lower payment so that the rent will cover my costs. Then once the market comes back I'll sell and hopefully make enough of a profit that the money can be used as a down payment for a house for the husband and I. In the meantime, I'm thankful that my apartment is not under water and that every month I'm building up my equity.
Debt is complicated and you have to figure out how much you are comfortable carrying.
picture by Brad_Chaffee













