Jan 11th, 2008
What’s Worth Going Into Debt Over?
I hate debt. It took me awhile to get out of it after graduate school, and all of the usual stories applied: I felt trapped, enslaved, and worked multiple jobs to try to escape it. It added to my stress level and deprived me of having as much fun as I wanted.
Debt is, in some situations, very difficult to avoid–if you want to buy a house, a car, or further your education, it’s pretty likely you’ll end up in some debt. So what’s worth going into debt over?
1) A home
2) An education
These two have a few things in common–first off, they’re more likely to appreciate in value than depreciate (and yes, I realize there are exceptions). They’re also the two most common loans that those of us in America can deduct the interest paid from our taxes. And, with proper planning and execution, the interest on these can be pretty low.
3) A vehicle
Depending on your occupation and location, a car (or in my case, a truck) may be close to a necessity. From some sources (like a credit union), auto loans can have reasonable interest rates, although the interest on these loans are not tax deductible. However, if it is an option (and for me, it’s not), consider if it’s possible to do without one–there’s maintenance costs, insurance, registration, and, of course gas, in addition to the actual vehicle purchase. For some folks, public transportation may be an option, or bicycling, or just plain old walking.
4) Medical expenses
Probably far more of a must expense than any of the others, but do whatever you can to avoid these–especially in an age where medical insurance is costing more and covering less.
While I think these are four things worth going into debt for, remember there’s an important caveat! Don’t spend more than you need to! Don’t get into a mortgage with an ARM if you’re going to live in that house more than a few years. Don’t buy a car that costs $50,000 new. Consider alternatives to that pricey private college like the community colleges and state run schools. If you get student loans, try to consolidate them in a way that makes sense. Get medical insurance. Keep up with your vehicle maintenance. Buy used. Even if you need things like prescription medication or medical equipment, it’s possible to shop around to see if you can get a better price.
There are lots of ways to spend less money on even some worthwhile debt.
