Wednesday, May 01, 2013

No Such Thing as Good Debt

"Too much of a good thing can be wonderful."  ~ Mae West

When I first started blogging in 2006, there was a lot of discussion about good versus bad debt.  The common thinking was that home mortgage debt, student loan debt and auto debt was "good" debt.   Credit card debt and other debt was typically categorized as "bad" debt.

My personal perspective was that debt is financial tool and it is neither good nor bad.  It's how debt is used that is the good or bad.   For example, the Great Recession has taught me that home mortgage debt and student load debt can be a financial negative if the amounts are too high.    If my home mortgage exceeded the value of my home or my student loan debt significantly exceeded my salary, I would feel the debt was a significant financial burden.

Although we've taken out a home mortgage, college loans, and auto loans, we were generally conservative in our borrowing.  For example, we made a 40% down payment for our last house and paid it off after 6 years.  At this point, we are debt free and do not plan to take on any new debt since we've witnessed the significant issues caused by debt during the recent recession. 

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

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