2-27-06
Some people feel all debt is bad. Others believe only some debt is bad.
So who’s right? It depends, of course.
In my opinion, there is some good debt and bad debt.
The bad debt is easy to identify. It is the credit card debt, personal loans, finance company loans or the check cashing scams that are really hurting a lot of people.
But I don’t think that list includes all bad debt. I believe all debt is bad unless it brings income back into your pocket.
If it is something that takes out and doesn’t give back, that is bad debt. That includes your house, cars, in-ground swimming pool or any other debt. Now if you can rent out that empty bedroom, use the car as a taxi service or charge people to use your pool, that debt isn’t bad.
Most people wouldn’t be all that crazy about doing that. Debt is called a liability. Even your house and autos, which are typically categorized as a person’s biggest asset, are liabilities.
Why? Simply because it takes money out and doesn’t bring any back. But everybody has to have a house over their head and transportation, right?
Yep. It’s something most of us have to borrow to purchase. But it still doesn’t make it good.
Acceptable, yes, but not good.
What makes this debt even worse is when people go over their heads by buying houses or autos that are more than they can afford.
In both areas, you need to figure out what your needs are when it comes to a house or car. Stick to that, not what you want. Better yet, when you are looking for a house, look for one that is underpriced because of lack of upkeep, buy that house and fix it up.
The same thing goes for buying an auto. It is always better to not buy a new vehicle, especially one that is almost a year old but is still on the lot.
If you want to buy something else, like a motorcycle, ATV or anything that is more like a want than a need, debt on this is not acceptable. After you have taken care of all your other debt, save the money up to buy items like this.
One other item I would like to bring up is that you should always be a smart sharper. Know the contract details. Find out the interest rate, fees, etc. Check with some other lenders to compare.
If this doesn’t sound like a good deal, go somewhere else.
So who’s right? It depends, of course.
In my opinion, there is some good debt and bad debt.
The bad debt is easy to identify. It is the credit card debt, personal loans, finance company loans or the check cashing scams that are really hurting a lot of people.
But I don’t think that list includes all bad debt. I believe all debt is bad unless it brings income back into your pocket.
If it is something that takes out and doesn’t give back, that is bad debt. That includes your house, cars, in-ground swimming pool or any other debt. Now if you can rent out that empty bedroom, use the car as a taxi service or charge people to use your pool, that debt isn’t bad.
Most people wouldn’t be all that crazy about doing that. Debt is called a liability. Even your house and autos, which are typically categorized as a person’s biggest asset, are liabilities.
Why? Simply because it takes money out and doesn’t bring any back. But everybody has to have a house over their head and transportation, right?
Yep. It’s something most of us have to borrow to purchase. But it still doesn’t make it good.
Acceptable, yes, but not good.
What makes this debt even worse is when people go over their heads by buying houses or autos that are more than they can afford.
In both areas, you need to figure out what your needs are when it comes to a house or car. Stick to that, not what you want. Better yet, when you are looking for a house, look for one that is underpriced because of lack of upkeep, buy that house and fix it up.
The same thing goes for buying an auto. It is always better to not buy a new vehicle, especially one that is almost a year old but is still on the lot.
If you want to buy something else, like a motorcycle, ATV or anything that is more like a want than a need, debt on this is not acceptable. After you have taken care of all your other debt, save the money up to buy items like this.
One other item I would like to bring up is that you should always be a smart sharper. Know the contract details. Find out the interest rate, fees, etc. Check with some other lenders to compare.
If this doesn’t sound like a good deal, go somewhere else.
posted by Craig Hall | 10:43 AM
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