Time to get into Debt Again?

Hanging out with people who have emerged from the shadow of Debt and are now ‘Debt Free’ is worse than going to a bar with a reformed smoker, born again Christian.  All you get to hear is how awesome it is to be free from the burden of debt and how empowered they now feel; I may have been guilty of this for a bit myself too….However the time comes when you realize that the limitations you put upon yourself by rejecting debt are just as detrimental to your wealth as accepting it foolishly.

I’m Debt Free – I’m Asset free too!

An example of where being Debt Free is debilitating is when you don’t own any tangible assets, it is a lot easier to say you are Debt Free if you don’t own the Chrysler Building in New York, but if you do, then a little debt is understandable (and actually many would argue a LOT of debt is the best way to do this, because debt=leverage on your investment).

If you think of it, many people can be free of debt, but have also acquired zero assets and therefore have a negligible net worth, take any kid at the age of 15, too young for Credit Cards any cash they are gifted or earn is free to save, but due to their age and the limitations on earnings it won’t be much of a nestegg for most kids.

Fast forward 3 years and the 18 year old is now an Adult (well, they can’t drink in most states, but they can get a Credit Card providing they can prove their ability to pay it off) due to the sad lack of Financial Education the majority of these kids go on shopping sprees and rack up debt wastefully, many then go onto College and since their parents didn’t plan properly with 529 Accounts get into further debt.  After college years the average American has around $30,000 in student loan debt alone.

So, needless to say the overwhelming burden it puts on people is something to break free of, but the key is recognizing when Debt can be good, and when embracing debt is a good idea.

The right college degree is an investment, and the debt might be the only way to achieve the degree.  Some degree’s pay better than others, so the investment/reward ratio must be examined.  I wish that Philosophy Students would be asked to write a Philosophy paper about their life after college burdened with debt and a degree that nobody wants before they start their first semester, and think hard about their decisions.  Taking on debt could be worthwhile if the degree pays dividends.

Patting yourself on the back too soon

I was very pleased when I cleared off all my debt, some of which had been dragged around the world with me for many years, even more pleased when I purchased and renovated my first home all in cash, but looking forward is my current asset situation enough? Sure I could be comfy for a while, but do I have enough growth to get me where I want to go?

Is it Time to Get into Debt Again?

I have been debt free for many years now, but I think it might be time to take on some debt again in order to leap forward with my Net Worth.  My reason is that my new business will take 6-8 months without income to build into a profitable enterprise, and once there will support my family and add considerable value over the long term.  I would also take on debt in the future for investment property, once there is sufficient cash flow from the new business to be standalone I could easily see more debt coming in the form of a mortgage to get on the Investment ladder.

Perhaps its time to get over the knee jerk reaction to being debt free, and start pushing forward again with debt, in doing so i’ll be certain to watch out for lifestyle inflation and ensuring that I am not taking on debt purely to sustain the lifestyle ‘I am entitled to’.

Debt is a serious issue, and accepting it into your life takes a lot of self control.  But rejecting it on principle can be just as damaging to your finances.