The Myth Of Good Debt

I still remember the shocked and confused look on my friend’s face when I mentioned car financing. He was born overseas and the concept was completely foreign to him. After he took a breath and composed himself, he said, “Kim, if you can’t buy a car for cash then you can’t afford that car.”

Flash forward almost 20 years and his words have become mine. Although I use that phrase for everything from clothing to furniture, beach trips to jewelry. Although even if you can afford that shiny new widget, it doesn’t mean you should buy it.

But I digress. The point I was trying to make is that Americans have been conditioned to believe that loans for cars, engagement rings, and even vacations are perfectly acceptable and often desirable. Oh how excited we get when we are able to refinance our mortgage at a lower rate. So much so, we are apt to tell our friends and family all about how much money we’re saving.

Here’s the thing, though. What we’re really saying is this, “I can’t afford this thing, but I want it so I’m going to borrow money and pay even more on interest so I can have it.”

I know, I know…you’re thinking that I’m being unfair. But am I? What if we all had to live within, or dare I say, below our means? How would our lives be different? You probably wouldn’t be driving that gas guzzling SUV for one or watching a hundreds of channels on your big screen TV, but would that be so bad? Maybe you’d have to rent instead of buy a home, drive a used car, purchase designer clothing from a second-hand boutique, cook meals in your kitchen instead of dining out.

Last year in the US 449,900 people had their homes repossessed because they were unable to keep up with their mortgage payments and over 800,000 filed for bankruptcy.  These numbers are staggering and frightful, a testament to the way so many of us are living our lives. However, we don’t have to live like that. We can take back our financial lives if we can just remember that at the end of the day, debt is debt. There is no such thing as good debt. It’s a myth and if you don’t have the cash…you can’t afford it.