The Debt Dilemma: Navigating the Good and Bad

I have heard it said that debt can be a helpful tool for reaching your financial goals, but if you are not careful, it can also be a trap that can ruin your finances. So if you are going to use debt, the key is to use debt wisely and avoid taking on more debt than you can afford.

While I do not advise its use, here is a story from someone who has experienced the dangers of debt firsthand:

I was living well beyond my means. Making ends meet by supplementing my Income with credit cards. My paycheck was only enough to satisfy some of my basic needs. But our wants were way out of reach. I called around, trying to see if I could find someone or some way to help my situation. But to my dismay, there was nothing to assist. I’d gotten the credit card because there’d been a couple of errors in my paycheck, and II needed to be able to feed my family and pay my bills. But eventually, I was in over my head. I finally got a few of my creditors on the phone, who were more than happy to help me. “We will just put your payment on hold for this month and increase your credit limit, Mr. Stokes. We’ll take care of you.” Unfortunately, my paycheck was not entirely fixed as time passed, and I was again at their mercy. Their desire to take care of me had wavered the more I maxed out my debt usage. I had managed to dig a hole so deep that I saw no way out of it.”

I’m pretty sure that this story is not one-of-a-kind; if you listen to Dave Ramsey’s, Suze Orman’s, or any of the many other Money shows, you’ve heard countless phone calls from people struggling with debt. But isn’t debt supposed to be a helpful tool to use? While it helped me in the short term, by the time my paycheck issues were corrected, I didn’t see that helpfulness translated in the billing statement. I still had to pay it all back.

When I realized I was in trouble, I could not stop the fallout. I wouldn’t necessarily say that I hit rock bottom. But I was struggling to focus at work. I had no time for my family because I’d taken on multiple jobs, and my marriage was in trouble. Realizing my situation helped me seek the help I needed to climb out of my hole. But, I feel it was a lesson that I needed to learn. I learned that the less debt I had, the more opportunities I had.

“Here are a few things that I learned from my experience with debt:

• Debt can be a trap that can ruin your financial opportunities.
• If the debt can be avoided, Avoid it. It’s important to use debt wisely and move forward with a plan of action to pay it off as soon as possible.
• If you’re struggling with debt, don’t hesitate to seek help from a qualified financial professional.”

So now, I had two conflicting conversations going on in my head. One tells me that debt is an excellent tool to get ahead because you need money to make money; yet another conversation says to avoid debt. “Debt is Good!” “Debt is bad!” “Good Debt, “Bad Debt,” the advice is frustrating, confusing, and honestly, all seems like a bunch of noise! Amidst the noise, however, there is a voice that you should listen to to help you get your financial house in order. Yours!

I read one book that said debt is necessary to create a nest egg for retirement. The author argued that leveraged debt is the only way to accrue enough of a nest egg. But I also read another book where the expert said to steer clear from debt at all costs. Here is the truth of it. You determine your own financial journey. Your level of debt, how much money you have or choose to invest, is all a matter of the goals you set for yourself, the risk you are willing to take, and your current financial situation. Based on that, you determine which “expert” is worth your time and attention.

The debate over debt has been raging for years. Some people believe that debt is a necessary evil or a means to an end, while others believe that it is a trap that can ruin any future opportunity you may have. The truth is, debt just is. It can have good and bad uses, but those uses depend on you.

Good Debt

Some experts say some types of debt can actually be beneficial. For example, a mortgage can help you build equity in your home, and student loans can help you get an education that will lead to a higher-paying job. In these cases, the debt is an investment in your future and can help you save money in the long run.

Bad Debt

Bad debt, on the other hand, is a type of debt that is best avoided. For example, credit card debt can be costly and quickly spiral out of control if you’re not careful. Similarly, payday loans and other high-interest loans can trap you in a cycle of debt that can be difficult to escape.

How to Decide

Let me first say you can definitely operate in life without the use of debt. You can purchase a car and not have a car note. You can pay cash for a house and need a credit card! Paying with cash or a debit card for these things is 100% possible. It simply requires patience, time, and a plan. But how do you decide whether or not a debt is right for you? It depends on several factors, including your financial goals, risk tolerance, and current financial situation. If you are like me, you may decide the less debt, the better!

If you’re saving for a major purchase, such as a house or a car (even though you can purchase with cash), debt may be a necessary evil. However, it’s crucial to ensure that the monthly payments can easily fit into your budget and that you plan to pay them off quickly. If you have a plan before taking out debt, managing it becomes easier. Just do not deviate from your plan.

If you’re taking out debt to pay for everyday expenses, such as food or gas, it’s probably a sign that you’re living beyond your means. In this case, it’s best to cut back on your expenses and save up for these items before buying them. (Call me, and I’ll help you devise a plan!)

Who to Listen To

The advice out there varies, as do the professionals giving it. When it comes to debt, it’s essential to get advice from someone that will help you assess your financial situation and guide you toward making a decision that will keep you on track to reaching your financial goals.

It’s also important to remember that there is no one-size-fits-all answer. This is why your goals, budget, and lifestyle are the sole factors that must be addressed when deciding. What works for one person may not work for another and may not be the best fit for you. How you choose to use (or handle), debt depends on the goals you have for your finances and the lifestyle that you are trying to achieve.

If you are struggling with debt, going further into debt is a decision you must consider very carefully or, if possible, avoid. You may want to put some things on hold while you get control of your finances. However, not doing so could place you in a situation that will be difficult to turn around. And that can cost you years of financial investment opportunities while you repair the financial damage.

All of the advisers agree that debt is something you don’t want to keep around for too long. It needs to be managed efficiently and effectively. Even though its use can be a helpful tool for reaching some of your financial goals, it can also be a trap that can negatively impact your finances. It is a double-edged sword. The key is to be smart. Don’t use debt frivolously, and avoid taking on more debt than you can manage. If it can be avoided altogether, that’s okay too.

If you’re considering taking on debt, be sure that you fully understand the terms of its use. Make sure you can afford the monthly payments and that you’ll be able to pay off the debt in a reasonable amount of time. It may be beneficial to put some time between you and the decision to take out the debt. I use a three-day window for sitting on any big purchase decision. And if you’re already struggling with debt, don’t hesitate to seek help from a qualified financial professional to help get you back on track. With some planning and effort, you can build an economic future and determine whether debt is good or bad.

**Are you looking for someone to talk to about debt reduction… Talk to me

Here are some free tips on How to get your financial house in order:

• Make a budget and stick to it.
• Pay off your debt from smallest to largest.
• Cut back on your expenses.
• Increase your income.
• Get help from a financial advisor.

“Getting out of debt takes time and effort, but it’s possible. With a little planning and discipline, you can achieve your financial goals and build a secure financial future”.

– Corey Stokes –