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Good Debt Vs. Bad Debt: My Own Musings

Often times when reading Personal Finance article,s you’ll hear the term “Good debt” and/or “Bad Debt.” As you might expect, it is generally easy to distinguish between the two. Credit cards? Bad. Student Loans? Good (Mostly). Mortgage? Good. The list goes on and on depending on how much the lender manages to fleece you out of each month. The higher the interest rate, the more likely you are to be struggling to make progress to eliminate the loan from its parasitic-by-nature existence.

Originally, when I first began my own finance journey, I avoided just about every type of debt there was. I had short bouts where we would need to pay off the remainder of our small car or the remaining credit card debt of my now-wife. Early on, this whole process is easy, because without a lot of obligations, discretionary income is rather easy to come by. Now that I’m a homeowner, however, its easy to see why people get stretched thin. Right now we have one student loan, one car payment, and one mortgage to pay, and that makes me really uncomfortable sometimes. I can just feel the tendrils of the bank latching on and taking their fair share of my hard-earned lifeblood of income. They need that sustenance and, at the moment, I have no choice but to give it to them. For awhile now I have been more flexible in my view on debt. A mortgage became acceptable, paying the minimum each month on my student loans was OK, but as the months roll by, I’m quickly beginning to realize that it isn’t OK anymore.

After taxes, this money is mine, and I want to keep it that way.

As per my previous post, a war on debt needs to be fought on multiple fronts. Severe cuts in your daily lifestyle can make rapid repayment possible, but often via the hidden cost of happiness. If you really enjoy heading to the bar on a Friday night with friends to have some drinks (This is an arbitrary example), then having to cut that out is, in fact, going to hurt you. Not a lot, but enough that you’ll miss it.Earning additional money will help you get your debt under control, but working too hard will burn you out and leave you left without much time for leisure activities. No, a balanced approach is necessary.

In the end, I’ve come full circle. I have returned to my original thinking that all debt is bad. I understand why some of it exists, but I will no longer stand idly by and continue to pay the minimum.

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