Debt. Is it good or is it bad? I always think of debt like the fat I have on me. I know, but stay with me on this one as it could be great metaphor or just something I should have kept to myself. Similar to the fat I have around my body, I know I require some fat and I’m told there are even good fats my body requires, but the challenge I face is ensuring I have only the good kind of fats and even more importantly having the right amount of it in the right places.
Alright, maybe I should just stay away from making metaphors. Here’s the what I’m trying to say. Keep your debt low because having a high debt load creates cash flow issues (less money in your pocket), stress (physical and emotional), and a high debt load eventually leads to constant debt restructuring appointments at your local financial institution (no fun).
Avoid taking on debts on things that do not go up in value or do not hold their value over time. It’s one thing to borrow money but it’s another thing to borrow money on something you know you will never get the value of what you paid into it back. Even with assets that appreciate over time you still need to be careful on how much you carry.
When taking on debt do it at a manageable pace. Don’t overextend yourself even if the asset usually increases with time. When you purchase a home, avoid maxing out your budget. For students, pay off one student loan before going back to school for something else if possible.
To recap, keep your debt load low as possible. Note I said low not zero because its almost impossible for you not to carry some form of debt. If we all had zero debt our economy would come to a grinding halt. When you decide to take on debt do it on things that appreciate in value and avoid taking on excessive debt on things that do not appreciate or hold their value. But perhaps the best reason to keep your debt low is it removes one less stress from your life and I don’t know about you but life is stressful enough without debt issues.