When Is It Okay To Be In Debt

Believe it or not, there are instances wherein it is okay to go into debt. Ideally, it is still best to pay for things in cash. But if you really have to, there are only three debts that can be considered to be beneficial for you. These debts, in general, can still lead to your financial ruin if you do not take care of them but nevertheless, these are the only ones that can contribute to your personal growth.

The first debt that makes sense are student loans. Anything that will contribute to your skills and your ability to make more money can be considered as a good debt. Having your degree will definitely put you at an advantage when it comes to employment opportunities. You can earn twice more than high school graduates if you got the right education. That alone makes student loans worthwhile. But before you apply for one, make sure that your future career has the potential to earn enough money to help you pay off what you owe.

Another debt that is okay to get is a home loan. As you pay off this kind of debt, it builds up the equity of your home. If the market conditions are okay, you can even sell it after a couple of years and earn yourself profit. Or you can start a business that involves buying and selling of properties. You can buy an old home, renovate it a bit and then sell it at a higher price than when you got it. Of course, you may have to coordinate with your lender as they have liens on that property.

The third and final debt that makes sense are business loans. Using a debt to grow your income potential is a smart way of getting debt. But just like in student loans, you need to make sure that your business has the ability to pay off what you owe. Before you can apply for a business start up loan, the lender or investor will require you to submit a business plan that will tell them your financial goals. This will help them decide if your business is worth investing in.

Despite the potential that these debts will give, you still have to analyze if this is a debt that you really want to be in. Debts can have the power to tie you down and limit your spending capacity. It can even dictate how you will live your life in the next few years.

Also, regardless of the potential of your debt investment, things can still go bad. Build up your reserve fund so you have a backup plan - in case your main income falls short or stops altogether. And if things get out of hand, know that there are debt relief options that can help you get out of your debt problems.