Debt can be a positive thing. But education and discipline are crucial, especially when you’re tempted to go into (more?) debt for short-term, feel-good reasons.
Here are 10 reasons why debt can be good.
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Where would many powerful businessmen and women be today without debt? You can use it to do things it would take too long to achieve otherwise.
Or, you can use it to build foolish and avoidable debt — like adding a pizza to a maxed-out credit card and paying for it for seven years with interest!
Yes, they are creditors, but if you have debt, that means you’ve passed a credit check, and now someone besides your mother thinks you’re pretty wonderful.
If what you are buying with debt will last into tomorrow, then it may be OK.
For example: You need a car, you can swing the payments for the next five years and you intend to keep the car for seven years. Plus, interest rates are low, you may save on gas, be safer and not back into things (if you get the rear camera)!
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If you try to save up the full purchase price for a house, you’ll already be in the nursing home before you can move in. Interest rates are hyper-low, prices are rising and you’ve got to live somewhere.
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Short-term debt for short-term needs, where you have a plan to pay off the balance in a reasonable time frame, makes sense. Long-term debt for short-term needs, does not. (See pizza reference in No. 1.)
If you have a sound reason to borrow the money and can afford the payments, you’re good to go.
If you don’t, don’t make the mistake of using debt and hoping that you can afford to pay for it later. Don’t make hope part of your debt repayment strategy.
Even if you can afford the payments today, have a firm plan in place to pay it back before today becomes forever.
Yes, the Federal Reserve raised rates in 2016 — from zero percent to next to zero percent.
Student loans can be helpful, especially if you know what career you want or your career field pays enough to make up for it.
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If not, consider getting your post-secondary education on the cheap by joining the military, enrolling at community college or choosing a career that will forgive your loans over time.
Other than student loan or mortgage debt, you can recover from most debt meltdowns in two to three years after a bankruptcy, real estate short sale or foreclosure.
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