In short, YES! Now you have to remember this blog is written by a guy who had major debt and still has some debt. You will not get the technical opinions on this subject from the industry experts but you will get my view and I believe I am a mainstreet kind of guy. I am your everday spender. I want things and I am still learning how to get them without going further into debt.
Now what is the definition of “good debt”? To me this is an easy question. Good debt is debt that you can look back on and say you needed it to get you where you are today. An example of that is Student Loan debt. I can honestly say that without it, I would not be making nearly as much money as I’m making right now. I would not have this job which means no house, car or private education for my kids.
Now for my opinion and please don’t shoot the messenger…..NOT ALL STUDENT LOANS ARE GOOD! I say this because if you go to school to get a degree in say…Education just as an example. When you complete your 4 years of higher education, you come out with $40,000 in student loans to make only 25-30k a year. Your debt has to be able to get you a job that “increases” your earning potential. Being a teacher is a noble trade but I think a teachers salary is in the range of $14.50/hour. My salary is $25/hour….do the math. Now if I had it my way, I would pay teachers $40-50,000 a year because we depend on them to education our children….Nuff Said!
What about a home mortgage loan? Is that an example of “good debt”? Yes, in my opinion it is….in this economy (Hmmm). However you should not pay anymore than about 3 to 3.5 times your annual income.
Cars may be a form of “good debt” as long as you “NEED” it to get you back and forth from work. Do not pay more than 25-30% of annual income.
Tomorrow: Money Saving Tips
