I’ll never forget the words of civil rights advocate, John Lewis. In June 2018, he tweeted, "Our struggle is not the struggle of a day, a week, a month, or a year, it is the struggle of a lifetime. Never, ever be afraid to …get in good trouble, necessary trouble."
That is precisely how I feel about debt. Don’t get me wrong, I am a firm believer in eliminating debt. It’s one of the principles of living wealthy in retirement. But there is such a thing as good debt. And like Mr. Lewis’ analogy, traveling the road to retirement age with the confidence that your golden years will be rewarding is definitely a lifetime struggle.
Of course, the ideal is to become and remain debt free. But in reality, unexpected ‘life happens’ emergencies come along that make this scenario unrealistic. And in addition to not owing anyone, living your best life also includes the ability to fulfill your needs along with some of your wants. But let’s face it, paying for both wants and needs may require more than whipping cash out of that wallet or writing a check (yes, there is still such a thing). Another alternative is confidently placing expenses on a credit card, knowing you can pay the amount in full when the bill comes due. Any other scenario requires getting into debt.
Here is where ‘good debt’ comes into the picture. My definition of ‘good debt’ encompasses owing for things that you’ve deemed important to your efforts to live your right life now and through retirement. And only you can decide what these things are. It may be buying a home (which, as you know, also has tax advantages), paying to further your education or addressing a health issue.
The health issue situation is one I can most definitely relate to. Eight years ago, walking was such that every step I took was painful. Not a pleasant way to live. I needed knee replacements and a hip replacement. I decided to have all three surgeries over a two-year period. Of course, my health insurance did not cover all the associated expenses, but I felt going into debt was worth the cost to improve my lifestyle. It was one of the best decisions I’ve ever made. It took a while to pay off my portion of the expenses, but with careful planning I was able to do so without too much sacrifice.
That’s the other part. Debt must be manageable. Ideally, before taking it on, you must be comfortable knowing you will still have a roof over your head and food to eat while you tackle paying down your chosen expenses.
Another aspect of good debt is to know how to owe responsibly. In order to establish and maintain a high credit rating you must recognize that every time you use your credit card or borrow money in any form, you are essentially taking out a loan. The only way to remain in good standing and position yourself to borrow again is to pay off your obligations in accordance with how you’ve committed to do so. If you need to know more about credit, check out my blog posts So, Let’s Clear Up How Credit Works and Things They Don’t Tell You About Credit Score Calculation.
Debt is, unfortunately, a necessary evil. My advice is don’t be afraid of it. But make sure you’re the boss. Borrow wisely. Don’t let debt control how you live your life.
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