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The Debt Free Lifestyle
Many people have been taught that you cannot get ahead without debt. We are also inundated with advertising telling us we can have anything we want. All we need to do is put it on our credit card.
We have become an impatient society, we want it right now. We have lost the ethic of working for what we want.
It is not how much money you make; it is what you do with it. By living without debt you can actually have a higher income since you are not paying out interest, you are actually getting paid interest on invested money.
All debt is not created equal. We will classify them as good debt and bad debt.
To simplify the classification we will say that good debt is a loan for something that you could sell at any time and repay the debt. This narrows down good debt to a home loan and possibly a home equity loan.
A bad debt, of course, is a loan on anything that will lose value.
Let's take a look at some debts that we would consider bad debt.
Home equity loans are in the gray area. They could be considered good debt if they are used to repair or improve your home, but you would be a lot better off to just save up the money for the project. Home equity loans become bad debt when used for purposes other than home improvement or maintenance. In other words a bad home equity loan is for anything that does not add to the value of your house. Do not jeopardize your home by taking out a home equity loan on unnecessary items.
One possible good use for a home equity loan is when the interest rates are low. You can use a home equity loan to refinance your mortgage. Home equity loans generally have lower costs than conventional home loans.
We consider school loans bad debt. If you finish school, get a good high paying job and then attack the loan like mad, a school loan may work out. The problem is that there are too many things that can go wrong. At best, even if you do graduate and get a good job there are always a lot of other expenses at this time in ones life. You are really behind financially when you start your working life in debt.
Auto loans are bad loans that have become common practice to us. We pay interest on a vehicle that will only be worth one half of its original purchase price in five years. Lately it has also been common for us to borrow more than a vehicle is worth. We can trade a car in that we still owe on, and roll that owed amount over into another vehicle. This gives us a loan amount that is higher than the value of the car that we drive away. We have lost our capacity to say NO.
Co-signing is a bad debt that usually and unfortunately involves family. If someone cannot qualify for a loan at a regular lending institution, they should not get a loan. The fact that they can't qualify for a loan elsewhere should tell you that they are a huge risk. Use this opportunity to teach them how they can get what they want by working harder for it and delaying the purchase.
If you want to get off of the debt treadmill, you must run as far away from debt as you can. You cannot use debt to get out of debt. Even if you do, you have not changed your habits; you must change your lifestyle.
John Cook is family oriented and likes to help people get off and stay off the debt treadmill and secure the financial future of their family. You can read more about securing your families finances at his website http://www.financeforfamilies.com.
MORE RESOURCES:
IRS offers tax debt relief KGO-TV If you cannot afford to pay your taxes, Uncle Sam actually wants to give you a break. There is news of some possible relief from the Internal Revenue ... |
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High Court ruling that lawyers are 'debt relief agents' gets mixed reaction Wisconsin Law Journal In the unanimous opinion, Justice Sonia Sotomayor wrote that bankruptcy attorneys fall within the meaning of “debt relief agencies” under the Bankruptcy ... Bankruptcy law doesn't restrict free speech, Supreme Court says |
Obama Refinance Plan – Debt Relief Help with Your Mortgage Home Loan Subprime Blogger (blog) Many hard-working Americans need debt relief help when it comes to their mortgage home loan. Unfortunately, many Americans got in over their head and they ... |
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 CompareAndSave.com | Obama Credit Card Debt Relief Program – New Act to Help Lower Debt Load Subprime Blogger (blog) The Obama credit card debt relief program was designed to help all Americans alleviate their credit card issues. The new Credit CARD Act that was signed ... Credit Card Debt Relief: 3 Simple Steps Credit Card Debt Relief Self-Help Tips Offered by Total Debt Relief ConsumerDebt and New Federal Credit Card Act (CARD) to be Topic of March 9 ... |
Tax Fact 1-The Mortgage Forgiveness Debt Relief Act of 2007 Before It's News The IRS wants taxpayers to know about the Mortgage Forgiveness Debt Relief Act of 2007. In the waning weeks of 2007, Congress passed and President Bush ... |
 SkyNewswire.com | Banking and Finance : Unsecured Debt Relief Services - The Best Way To Locate ... SkyNewswire.com (SkyNewswire.com)--- Unsecured debt relief programs are accessible within just about every state in America however they differ significantly in terms of ... General Interest : Personal Debt Relief Services - Tips to Find The Top ... |
Column: Banks may replace overdraft fees with different ones Bills.com Federal regulations to eliminate overdraft fees may soon help debit card users find debt relief. The Federal Reserve Board issued a rule ... |
Gov: Debt relief needs regulation The Detroit News Credit unions, banks and regulated debt management companies can help consumers with debt relief, she said, while unregulated settlement programs can be ... Warning For Debt Relief |
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