Clarity & realism are required when borrowing
There are many articles about good debt v. bad debt. This is wrong. Debt is useful or useless.
Good debt is mostly mortgage and student loans — up to certain limits, the interest paid is tax-deductible.
Whether a debt’s interest payments are partially tax-deductible doesn’t tell the whole story. Nor is it helpful in daily life when those bills come — every month.
I prefer to consider debt useful or not, rather than good or bad.
Am I undertaking new debt to achieve a goal? If yes, this is a useful borrowing.
Sound goals might be to provide stability, safety, comfort, and education. Buying a home, or borrowing for schooling, are examples. Perhaps an auto loan for that car needed to get to work and back is a useful debt.
Sometimes even using credit cards in an emergency such as car repair or medical treatment may also be useful.
The decision rests with me to weigh the reasons behind taking on new debt. Clarity and realism are required when increasing my debt load. Life is a game of incomplete information. If I make the best decision I can with the information, I have at present. I’ve done my best. What results is an entirely different matter. Outcomes and decisions are separate.
Is it essential to upgrade my home? Or will my current home suffice? Will a car without every creature comfort get me where I’m going instead of borrowing more for the expensive car? Do I have a career goal in mind when borrowing for education? Is my goal realistic? Do I have a workable plan to achieve this degree or certification?
Striving to make sound decisions gives me the sound footing I need when faced with the bill. If I can reflect on the decision to buy a new home with certainty and clarity when paying the mortgage, I will be best able to pay each month.
On the other hand, if I decided to take on new debt without much thought, to chase a good feeling or ego boast, when that bill comes, and it will. I won’t have the resolve I need to pay. I may go even further in debt to chase that feeling again.
