{ When Is Debt OK? }
Lisa commented to my "Cheering Squad" post a fabulous question about debt that has inspired me to rattle on more on the topic. (I hope Lisa doesn't regret asking!)
When is debt OK? Is debt ALWAYS bad? Well there are some people in the world with far more knowledge than little 'ol me who have very definite opinions about these questions but since this is my blog, I'm going to offer my thinking on the matter. One small opinion which you are free to completely ignore.
In a perfect world, one would only enter into a debt with forethought and a plan to pay it off. In THIS world, most of us slam up against a crisis situation (the car finally really died or the water heater really was rusting from the inside out, who knew?) and whip out our credit cards. Life happens and often it isn't cheap. But in those moments where you are making a choice to go into debt...a house, a NEW car off the lot when the old one probably has two more years left on it, a vacation or new clothes...it's those moments that you have to really be honest with yourself. Other people would say, "don't do it, you don't need it, walk away, cash only." (Full disclosure here: I am currently trying to toe that line of mild deprivation but I wouldn't necessarily impose that on others, it's not a easy road.) I'm not going to say that because for 99.9% of us, that's completely unrealistic. What I DO want to say is that if you choose debt don't kid yourself about it. You are spending money you don't have. You are borrowing from your future and you are living beyond your means. Period. Just don't stick your head in the sand.
Now, back to the original question, when is debt OK? Debt is OK when you plan for it and never let it drive the bus. An example: when we went to ask for a mortgage 9 years ago we were shocked to learn what we qualified for on paper. When I asked the kind man how much that particular mortgage would cost each month (30 year fixed) he casually rattled off a number that was more than twice any rent we had ever paid before and I couldn't imagine where we'd ever get that kind of money every month for the next 30 years. When I asked him instead to work the numbers the other way (I want a monthly payment that is no larger than....) he gave us a mortgage figure that was half the original amount. And so that is the house we bought (and still have today). With the mortgage we have, we can literally lose half of our current income and still be able to pay our note or we can rent the house for more than what we owe each month. We didn't get our dream home and yes, we've been remodeling it since we bought it (cash only remodels) but it feels good to know that we have financial options and we're not tied to the house payment.
Debt is OK when it won't overwhelm you or force you into places or decisions you don't really want to be. What you don't ever want is to dig yourself so deeply into a hole that you will never get out.
When is debt OK? Is debt ALWAYS bad? Well there are some people in the world with far more knowledge than little 'ol me who have very definite opinions about these questions but since this is my blog, I'm going to offer my thinking on the matter. One small opinion which you are free to completely ignore.
In a perfect world, one would only enter into a debt with forethought and a plan to pay it off. In THIS world, most of us slam up against a crisis situation (the car finally really died or the water heater really was rusting from the inside out, who knew?) and whip out our credit cards. Life happens and often it isn't cheap. But in those moments where you are making a choice to go into debt...a house, a NEW car off the lot when the old one probably has two more years left on it, a vacation or new clothes...it's those moments that you have to really be honest with yourself. Other people would say, "don't do it, you don't need it, walk away, cash only." (Full disclosure here: I am currently trying to toe that line of mild deprivation but I wouldn't necessarily impose that on others, it's not a easy road.) I'm not going to say that because for 99.9% of us, that's completely unrealistic. What I DO want to say is that if you choose debt don't kid yourself about it. You are spending money you don't have. You are borrowing from your future and you are living beyond your means. Period. Just don't stick your head in the sand.
Now, back to the original question, when is debt OK? Debt is OK when you plan for it and never let it drive the bus. An example: when we went to ask for a mortgage 9 years ago we were shocked to learn what we qualified for on paper. When I asked the kind man how much that particular mortgage would cost each month (30 year fixed) he casually rattled off a number that was more than twice any rent we had ever paid before and I couldn't imagine where we'd ever get that kind of money every month for the next 30 years. When I asked him instead to work the numbers the other way (I want a monthly payment that is no larger than....) he gave us a mortgage figure that was half the original amount. And so that is the house we bought (and still have today). With the mortgage we have, we can literally lose half of our current income and still be able to pay our note or we can rent the house for more than what we owe each month. We didn't get our dream home and yes, we've been remodeling it since we bought it (cash only remodels) but it feels good to know that we have financial options and we're not tied to the house payment.
Debt is OK when it won't overwhelm you or force you into places or decisions you don't really want to be. What you don't ever want is to dig yourself so deeply into a hole that you will never get out.
posted by Steph at
8:53 PM
1 Comments:
Hi Steph!
No, I do not regret asking - lol! Thank you for expanding on the subject. After a lot of years of living a bit beyond our means, we are finally (hurray!!) in a reasonably sound financial condition and I LOVE IT!!! I am so in the same camp of your thinking, but it has taken a good effort(over 2 decades)to nudge DH in this direction. The effort paid off, though, now when he pulls out a card to pay - it's a debit card!
Thanks again for your insight!
Post a Comment
Subscribe to Post Comments [Atom]
<< Home