For most of us, every day some type of financial decision needs to be made. It’s important to always weight the pros of your choices against the cons. Although at first it seems like avoiding debt altogether is a good financial choice for you, debt can also be a tool for financial success.
For example, if in your quest to remain debt free, you are turning down “good debt”, you are doing yourself a disservice. Good debt is debt that allows you to leverage your investments, for example, taking out a mortgage to buy a house. This is a financially beneficial move because houses and property tend to appreciate over time, and owning your home can lower your living expenses compared to renting. Another example would be taking out a student loan for post-secondary education. While student debt can be a huge responsibility, it is also an investment in yourself that boosts your potential earning power.
It is important to remember that any debt that is excessive or used to purchase wants instead of needs should likely be avoided. Additionally just because the debt is good instead of bad, does not mean that you should borrow all of the money that is available to you. Use good judgement when you make decisions to borrow money. Even if the debt is considered a good debt you should work to pay off your debts as quickly as possible.
Tags: borrowing, debt, financial plan, home mortgage, investments
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