Is Debt OK?

We talk a lot about paying off debt. We really hate high credit card balances because they tend to be for things that are not really tangible or long lasting, and those rates can really run out of control. There has been a lot of talk about the mortgage crisis, but I am sure that credit cards have gotten a lot more people in financial trouble with little to show for their expenses.

Emergency Credit

Of course, it is better to be able to pay for an emergency bill with your savings. But we, of all people, understand that sometimes troubles just seem to pile up. It is not always possible to choose between filling a cavity and getting your car repaired. Your dental problems could just become worse if you neglect the cavity, but you may need your car to get to work. So sometimes, the cost of debt will be less than the cost of waiting for a service. In that case, you should probably just go ahead and charge it.

Long Term Goals

Most experts advise us that it is ok to borrow for a long term goal.

An affordable home mortgage is one example of a loan that is usually acceptable. We all need a place to live, and you should, at least, have a house to show for your loan! Besides, we also all have to live somewhere. You will probably have to pay rent or pay a mortgage.

Borrowing for an education, that can help you get a better job and more productive life may be another example. These days, we hear a lot of stories about graduates who got in deep trouble because of loans, so you should really consider all of your options to keep debt as low as possible. It is becoming a lot more attractive to spend, at least, a few years in a local community college if university tuition is out of sight.

Basic transportion may also qualify as an acceptable loan. If you have a Kia budget, don’t go for the new Lexus though. Auto really devalue, and people save a lot of money by purchasing the least amount of acceptable transportation.

What does not qualify as an emergency?

A vacation does not qualify, and neither does a restaurant meal. These thing can really add up, and you can find yourself making payments for years on vacations or nights out you barely remember.  If your budget is tight, it may be time to rediscover the pleasure of a picnic or day trips. Hotels are nice, but if Aunt Marge doesn’t mind, pack into her place for your visit.  If you are short on funds for the grocery store, why not try cleaning out the pantry and using up all those cans of chile you bought a few weeks ago? Maybe next time, that emergency savings account will be funded.  

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Well it turns out that loans without interest often require a fairly quick payoff time. If you can afford to pay off your car in 3 years, rather than 5 or 7 years, you will save money in the long run. But you can still find some very low interest rate loans that will let you have a longer time to pay your car off, and this will reduce your monthly payment. If that longer payout fits better into your own monthly budget, then you may consider it even if it will cost more in the long run.

Of course, it would be better to have the cash to just pay off a car, but reliable transportation pays off in the long run.

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