Some people might say that it all depends on which side of the fence, bank counter, or car lot desk you are on. Even if you're a borrower, though, debt can be good for your financial health and growth.
In the last 25 years, the amount of debt that the average American or Canadian has grown by a huge amount. The way I think now is, Why wait until spring? Get that car or big house right away. This is not how our parents were taught to think at all. Their attitude was often "pay cash" and "don't buy it if you can't pay for it." Most of the time, our parents were raised by parents who had lived through the "Great Depression" of the 1930s, when almost no one had anything: no job, no money, no work, and definitely no money to pay off loans. So, easy credit was neither available to them nor a part of how they lived. R. Z. Strokon, an economic historian, has said that "learning to wash floors" is the best education that many young people could get today.
It's important to know where an idea or even a way of life came from.
Is this way of thinking useful and important today? Today, if credit is used wisely, it can help a person or family increase their net worth over the course of their working and financial lives.
As you know, the prices of houses, condos, chalets, and summer lake cottages have gone through the roof in the last couple of years. You have to live somewhere, even if it's just to avoid paying rent. If you take a summer vacation, you'll have to pay for a place to stay or the interest on a loan for that summer vacation spot. Also, your mortgage payments may be tax-deductible, which could save you money overall. This is true if you have a job and enough income to put you in a tax bracket where the tax deduction helps you and your family save money.
The main problem is that in these times of high real estate inflation, staying out of the game and not buying property is not a good option. That by the next year, the price of the property may have gone up a lot, making it likely that you won't be able to buy it. Add to that the fact that the increases, while still within your percentage range, are based on much bigger amounts to start with, and wow. As an example, if the house of your dreams went up in price by a reasonable 10 percent each year, that's an extra $10,000 on your loan or mortgage. But if the price of that house has gone up to $300,000, you will have $30,000 more debt to pay off in order to keep that same property. This is why a lot of people who want to buy a home in the future are panicking and buying one now instead of putting off their plans. Otherwise, they might not be able to buy a home.
What if the loan payments can't be deducted from your taxes? In the case of an asset that loses value over time, it can be said that if you buy it on time, you are not only paying interest on the loan for the big screen TV from the big box store, but the TV is also losing value as you watch it. It could be said that the large plasma TV gives you enjoyment and a sense of status, which is a benefit in and of itself. However, watching those TV shows comes at a very high price.
But what if the asset that was losing value was actually making you more money? Then it would be a good idea to borrow? For example, maybe you don't have a way to get around or a reliable way to get around. As a person, you can't write off a car loan on your taxes. You might be able to get a better-paying job if you have a car, or you might be able to keep a good-paying job if your car keeps breaking down and making you late to work. If you can take public transportation to work, there may be costs and time costs as well. In this case, buying a new or used car and financing it may be good for your overall finances, even if you already have car payments.
In the end, as in life, nothing is either good or bad all the way through. It's hard to say. It can be good or bad to take out loans or mortgages and get into debt.
Don't let anyone push you into anything. Take some time to think about what you want to do and ask for advice from people who are qualified and have a wide range of skills. At the end of the day, everything in life is a choice between costs and benefits. No matter how smart a choice is, it will always involve some risks. Just do your work, and don't lie. Lastly, if you can help it, don't let yourself be pushed into deals that aren't in your best interest.
