I’m repulsed by credit card debt – so much so that I have never carried a balance on my credit card.
I’m anti-debt, yet, I use a credit card for most of our purchases. (The truth is, I just like the rewards).
We have had car debt, and student loan debt in the past, but have managed to get out from under their weight. We’re debt-free except for our mortgage.
I absolutely hate the fact that we even carry that debt, but to live in a wonderful home in a beautiful location was a choice that we made. Our home is an asset that will continue to appreciate for years to come.
But does that make my debt okay?
I recently read When It’s OK to Carry Debt which looks at two main times that it is okay to borrow money: for a home or for an education. The rationale is that both types of debt carry benefits that outweigh the costs.
I can agree with that concept. After all, homes appreciate in value and you have to live somewhere. A solid college education in a field that is expanding can yield a greater income and better benefits over the span of your career.
But… here’s the kicker:
All things in moderation. You don’t need a big, fancy McMansion. You don’t need an overpriced college degree.
Before you make the decision to take on either a mortgage or a student loan, make sure to evaluate exactly what your motives are for doing so. Determine what is most important to you, and shop around for the best solution.
You may find that a modest home requires less maintenance but still brings you just as much joy as a larger one. A public college may provide you with a better education than a very expensive private school. Make sure that if you’re majoring in Renaissance Costume Design, that you’ll be able to find a job that helps you pay back your $60,000 in student loans.
I don’t believe all debt is bad. I do believe ignoring the burden that debt will place on your future is.
Be careful.
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I agree that consumer debt can be a huge burden. However, I think debt is healthy if it creates cash flow for your family. Taking on debt can create additional sources of income and is not always negative or detrimental. Many very wealthy people use or have used debt to build their empires. Examples of debt that would create income include small business financing, real estate investments, product inventions/innovations, etc.
Dear fellow minnesotan-
I have a question for you- I am goig back to school, at the excellent age of 46. I have been offered only loans. Is there a website you can recommend that will run the numbers on my payback? Also, any ideas on how much I should take out? I need it all, and think it is better than putting things on the credit card. I will be doubling my salary (at least) in two years, from a daycare teacher to a nurse, and also finding more jobs. I am a single mom of 7.
@ Tracy – Congratulations on your decision to go back to school. I truly admire single parents – especially those that are working hard to change their financial situation. I think you are making a smart career move.
I don’t know of a website that will help you crunch the numbers to determine your return…… I did find this calculator that may help:
http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp
Student loans are far better than credit card debt because the interest rates are so much better… and you can defer your student loans for 6 months after you graduate – which will leave you time to find employment.
As for how much money you should borrow… that’s something you will have to determine based on your budget. My gut reaction is to say “Only borrow what you need.” But with 7 kids to feed, your needs may be different.
Have you looked around for scholarship resources? Organizations like the American Association of University Women offer scholarships for non-traditional students. Check with your financial aid office for info. And be sure to inquire about work-study options too – you may be able to earn a little bit of income in between classes while you’re at school.
Best wishes for much success!
Thanks so much, will follow-up.
I keep thinking there should be some programs for displaced homemakers, or something. I will keep researching!
I am redoing my budget today, hope to do a month to month breakdown so I know exactly how much I anticipate needing. Now I need the furnace, the car, the kids, everything to stay in working order for the next 22 months!
Your TC friend,
Tracy
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