The idea of being in debt almost always carry a negative connotation. And it is rightfully thought of as such because it is indeed bad to be in debt because it usually means that you are financially unstable. However, while most debts are bad debts, there are actually good debts that pave way to financial security and financial success. Here are three good debts you should consider having.
Having a debt for your education is one of the trickiest loans. If you regularly read finance stories and news then perhaps you’ll come across articles that detail the evils of student loans. While it is true that student loans do hold a huge potential to eat your life away even before you start living it, this only applies to those who have not done their research. Getting a loan for your education is still strictly a smart debt because it is an investment on human capital: yourself. By acquiring education, you are able to equip yourself with the skills and knowledge which you will use to find a job and make a living. And according to the Bureau of Labor Statistics, it is almost a certainty that higher education means higher income as shown below:
Average Weekly Income According To Educational Level (2014)
Less than high school diploma: $488
High school graduate: $688
College or associate degree: $1,101
Bachelor’s degree: $1,193
Higher than bachelor’s degree: $1,193
Advanced degree: $1,386
The cost of an education is no joke that’s why loaning is an understandable move. Developing your skills and knowledge is an essential part into acquiring higher paying jobs. Learn more to earn more.
Home ownership is something that is not commonly afforded by the average citizen. It is understandably so because buying a house and lot costs hundreds of thousands of dollars nowadays. In fact, at the end of 2015, the US Census Bureau estimates the average cost of a home at $374,900 which is an amount most US families cannot afford all at once.
Being in debt because of home ownership is a good debt because it is like an investment. Houses have a high tendencies of appreciating throughout the years. This means that not only do you have your own property which you can bequeath to your children, you also have an asset.
That’s why there are home loans that allow you to buy a house in exchange for a monthly mortgage that you’d have to pay until a set day. And when that loan ends, you’re going to be a certified homeowner. Moreover, interest paid in mortgages may be included in itemized deductions for federal income taxes. Having mortgages is a smart debt as long as you treat your finances right.
Being in debt sometimes doesn’t require you to out the loaned money anywhere. Sometimes it’s just about taking advantage of the low interest rates. We are currently in a low-interest market and it’s best to take advantage of it before these rates hike.
Think about it this way: If, for example, you want to buy new shoes, you can go ahead and use your credit card and pay the 15 to 20 percent interest. This is probably not the best decision. However, if you are planning to buy a car with a 2 percent interest then maybe you should loan it instead of paying for cash which you could invest instead to earn 6 to 8 percent.
Being in debt isn’t such a bad thing if you know how to use it to your advantage. So go ahead and live a life in debt but without worries.