I don’t care how hard you try – some people are so smitten with the idea that there is such a thing as “good debt” that it is futile to argue otherwise with them. If you dare offer the alternative idea “all debt is bad debt and there is no such thing as a good debt”, well then you might want to get ready to be physically attacked. They have plenty of others backing them up too. The media along with the marketing machine that pays their salaries make sure you get their messages loud and clear and over and over until its firmly ingrained. Then you can go on any number of personal finance sites and read in depth comparisons of various credit cards and their benefits, justifications and rationalizations why using credit cards to buy everything makes so much more sense than paying cash or using a debit card.
They talk about cash back incentives and fraud protection, and various other incentives credit card companies use to “reward” loyal card holders. Then these same proponents of good debt go on to talk about the merits of a college education obtained with student loans. I recently had it pointed out to me that there are many people who live their whole lives deeply in credit card debt, and other normal debt such as mortgage and student loan debt, but are content with their lives and without any significant financial troubles from doing so. I don’t know such people.
I do know some who appear to be living happy lives burrowed deeply in debt. I also know the rest of their stories. For example several people I know continue to this day to work jobs they hate, with people they don’t like, all to pay for a mortgage, student loans and a bunch of consumer junk they have obtained by using good credit to get it. They cant leave their jobs, despite wanting to, and despite many failed attempts to do just that. They haven’t been able to find other jobs that will pay enough to continue making all the payments they must make on their good debts. So they are trapped. Is it worth it? Apparently to them it is, because they keep doing it.
I know another couple who really wanted to move to another school district but couldn’t because at the time the real estate market was down where they lived and they owed too much money between the first and the second and the credit cards to be able to sell it and get out from under it. They also couldn’t rent it out because the mortgage payment was far more than any rent for the area could ever bring in. So they were stuck in a house in an area they didn’t want to be in any longer thanks to their good debt mortgages and credit cards.
There are so many examples I have personal experience with that I could easily go on and on for enough to fill a book. I will spare you that. I could also name names and details, which I wont do either. I believe in privacy, and freedom. People are and should be free to make what ever choices they like. That’s the other thing I keep saying, but some how it keeps getting overlooked. I don’t want to try to make anybody do anything. I just want to point out alternatives for those interested in considering them to look at, and help people who decide to get out of debt find their own way to do it. That’s it. Anyone in love with debt has nothing to worry about. I’m not going to slap their credit cards out of their hands or drag them off to intensive debt free philosophy training somewhere.
Another hotly debated topic is student loans. How great it is to be able to go to college for several years and not have to pay for much if any of it until you graduate. All that education is surely going to land you a higher paying job – right? Sad to say, that’s not always how it goes either. College tuition is now so bloated and expensive that more and more of the fields they issue degrees in fail to live up to the hopeful dreams of the newly minted graduates they continuously churn out. Even worse, many of those who graduated could have gone into the same jobs they ended up with just as easily without the degree, four years earlier, and with none of the debt. To make matters even worse the deck has been stacked even further against those who followed that path. Laws and rules are in place to make it very difficult if not outright impossible to get rid of that debt, even through bankruptcy. If those expensive degrees came with guarantees I’d bet you would see a lot less of them available.
Mortgage debt – is it good or is it bad? The idea is and has been for a long time that real estate will appreciate in value. So theoretically if you buy a home today and it goes up in value every year then when you sell it in a few years it will be worth much more than when you bought it. Even though you will have paid very little principle back on a thirty year mortgage in five or six years, it shouldn’t really matter anyway if the home has appreciated every year during that time. That’s the theory, anyway – and in fairness more often than not that is the way it works out in reality too. So the mortgage would appear to be a winner in the debate over good or bad debt.
The trouble starts when things don’t work out according to theory. Here is a big one. Suppose you get sick and can’t work for awhile, or that you become permanently disabled, or your spouse loses a job. Then what? How about if you lose your job? If you can not immediately find another making the same thing you will more likely than not be hurting very badly financially very quickly. It won’t take long to lose that mortgaged home through foreclosure. In theory in a worst case scenario you could sell it if you had to and pay off the mortgage and still have some cash left over. In reality it could take months to sell depending on your area and a multitude of other factors. Maybe you can sell it in time and maybe you can’t. The mortgage company still wants their money regardless.
Here is another thing to think about. The money that was obtained by using a mortgage to get it is an asset, so money is a good thing – but in this case that money is borrowed money and has resulted in a huge debt owed to others. In this case a mortgage company. While you have a point if you argue the money is a good thing, how is it that the debt can ever be a “good” thing? Now it may be an acceptable thing, or a tolerable thing to do in order to get that money – but I don’t see how the debt itself could ever be a good thing.
That’s just the way I see it anyway – but as I keep saying and will keep on saying so there can be no doubt, believe what you want and do what you like. After all, its your life your beliefs and actions will affect, not mine. If you are happy using credit to incur debt then I simply wish you continued happiness and hope things work out for you as you wish. If it doesn’t, and at some point in the future you have some debt problems just remember then that there are other ways of life too.