All about the challenges of Midlife Finance

When It’s Okay TO BE In Debt

One theme we here at MLF enjoy harping on is debt — or the lack of it. 

Don’t get it if you can’t pay for it. 

Buy it on credit — if you can’t pay your card in full every month, you’ll be adding interest. A lot of it. (Although some people argue that paying off large balances every month negatively affects your credit score.)

Debt can hold you back. It can warp relationships, keep you from taking advantage of needed bargains in real estate and vehicles, and ruin your ability to borrow more. Being in debt now will affect your future until you can get rid of it. (The debt, that is.)

Sometimes, though, it’s what you need to do. 

*Unemployment.  Very few people have jobs 100% of the time — which means, sooner or later, you’ll probably lose yours. If you must go into temporary hock to keep bills paid…well, you have to do it. That does not mean splurging on vacations and luxury items, nor should it keep you from paring your budget down as lean as possible. (Including no cable!) When you’ve got work again, you can pay it off. And start saving for the next hard time.

*Medical bills. Obamacare hasn’t been around long enough to see if  it really helps the average person. (Hopefully you’ve already taken this step. You need to.) Truth be told, though, if you’re lucky enough to have a good insurance plan, it often has a high deductible. Our insurance comes through Husband’s work for the local school district — and we have a $12,000 deductible. That means $11,999 of doctor’s visits and prescriptions before the insurance company pays a cent. (Thankfully, an HSA account lets you pay that before taxes, instead of after.)

The bill for even a quick stop at the emergency room or a broken leg is truly astonishing. What is helpful to remember: you don’t have to pay it all off now. Hospitals, doctors and even dentists will accept payment plans, if you’re committed to paying regularly. A regular payment is better than stressing yourself out — and earning a longer hospital stay. 

*Buying a home…or fixing up one. As long as you’re careful not to over-reward yourself with luxury items. (That hot tub can always be saved for, and installed in the future.)

*Transportation. Buying a car can give you reliable, safe travel for years to come — or it can be one of the biggest drains on your life. It’s your choice.

*An education — for you or your kids. College is expensive. Even if scholarships and financial aid cover tuition, you’ll still have to come up with cash for books and living expenses. And plenty of people struggle with student loans, now they have to pay them off. Ask yourself:

*Am I (or my kids) going to school because it really is necessary? (Or important)

*Will this degree train me/them for a better job…or am I just going because it’s expected?

*Does my chosen school deliver value?

*Have I done my best to find financial aid? 

*How little can I borrow, to get by? (Parents are relying less on loans than they have in years. Good for them.)

*A deal that gives you a financial advantage in the long run. Your refrigerator’s on the fritz, and the local store has a good brand on sale. Meanwhile, it offers a 12-month-no-interest payment plan. Fine…as long as you can confidently make the payments. (Miss one, and you pay interest.) People go into debt to pay for ‘hot’ stocks (sometimes pays off…sometimes not), cosmetic surgery (nahhh…unless it’s important to your health) and everything from a cruise to Bermuda to granite countertops in the kitchen. Ask yourself:

*Am I getting a killer deal by doing this now?  Will the price be similar if I get it later?

*Can I get by without it, if I have to?

*Will my business benefit?

*Will my finances be stronger in the long run because of it?

Sometimes it’s better to save — and wait. 

There are worse things in life than being in debt. All the same, it’s better not to be.

 

3 Responses to When It’s Okay TO BE In Debt

  1. Agreed on your comments, Daisy…but there are times when no matter what you do, you must take on debt. (Medical expenses, for example.) As a frugalite, raised by a Dutch father who hated owing money to ANYBODY, I grew up avoiding debt wherever possible. And I think that temperament has served me well over the years.

    So you save in the good times, to keep from owing in the hard times! But sometimes you just run out…

    Do we cut ourselves too much slack in this area? Are we, especially we as Americans, far too willing to do into debt for silly or unnecessary things? Absolutely. Do we always think ahead? Our country would not be in the pickle we’re enduring now, if that were true.
    The only way I can think of out of this mess would be to revert to saving and doing without…and many people are not willing to do that. Yet.

    You’re very welcome, Leila. Thanks for writing, both of you!

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