Parenting Blog

4 Good Types of Debt: When It Makes Sense To Take On Debt

This post is sponsored by Lexington Law

Living a debt free life is the ideal scenario but sometimes, taking on debt cannot be avoided. And sometimes it makes perfect sense to actually take on debt voluntarily.

I was going to include ‘getting medical attention and life saving treatment’ on this list of occasions where it makes sense to take on debt but dammit, no one should have to take on debt to stay alive. Instead here are 4 types of debt it makes perfect sense to take on throughout the course of an otherwise debt free life.

BEFORE A MAJOR LIFE CHANGE
It makes sense to take on debt in the build up to make a major life change, like leaving your cushy white collar job to be a stay at home dad, for example. My wife and I decided to spend about $20,000, using a home equity line of credit, to bring our 50 year-old rancher up to modern times and expand it to account for our growing family. The idea was that we would think of and get out in front of everything that could go wrong — roof, siding, water heater — and then, knowing the debt we needed to pay off before I could leave the workforce, work hard to pay it off. Once that debt was cleared, I was free and clear to be a dad full time.

Types of Debt That Make Sense To Take On Have a Once In a Lifetime Experience

TO HAVE A ONCE IN A LIFETIME EXPERIENCE
We’re not talking your annual trip to Disney World here, but when you’ve got a genuine once in a lifetime, lightning in a bottle chance to have an experience you should consider taking on debt to make it happen. Regret costs more than debt and will last far longer.

BUY YOUR FIRST HOME
Buying a home is likely the first time anyone takes on a massive amount of debt and that is perfectly reasonable but don’t assume the classic American home ownership dream has to be your dream. If you want to rent for a while, move around to see what life is like on different coasts or in different countries, and stay nimble for professional or personal reasons, you do you man. But if you want to settle down, feel that unique feeling of, “OMG I OWN THIS PLACE!” then do take on that 15, 20 or 30 year debt but do so sensibly. Find a home within your current and expected near-future budget. Remember to not over extend yourself financially and remember also that the bigger the place, the more rooms you need to furnish and more windows to cover. And let me tell ya, window treatments ARE NOT CHEAP. Do not take on debt to hang curtains in a house bigger than you need!

types of debt that make sense to take on

START A BUSINESS
In the late 90’s, I used credit cards to fund a small business. Maybe not the wisest personal finance move but I was young, hungry, and had stars in my eyes. The enterprise lasted only a couple of years and cost me close to $8,000 but it taught me things I could never have learned in any textbook. That was real life, real struggle, real failure, and (a little bit) of real success. The experience gave me a great story to tell which I parlayed into an entry level position at a phenomenal company where I’d work for nine years, getting promoted a handful of times. That startup small business debt was like an affordable college level education with a major in business, entrepreneurship, project management, and living your own life. Paying my debt off wasn’t easy and repairing my credit took years because I was doing it without professional help, but I wouldn’t change a thing about taking on debt to start my own business.

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