People will often talk of “good debts” and “bad debts”. Good debts are considered student loans and mortgages while bad debts are pretty much any other kind of debt, but mainly consumer debt (debt taken on to “consume” goods…think of credit card debt and auto loans).
We often say that money is simply a tool. Debt is really no different, it is a tool. When used properly it can build great things. A mortgage on a home that is expected to go up in value or a student loan that increases your earning potential are some examples. There is an economic upside that makes these debts “good” or “acceptable” from a financial planning perspective.
All other debt should be avoided as much as possible. These debts, in a very real way, make you beholden to the lender. This is a because you can’t use your money the way you want to, you have an obligation that is not negotiable.
Part of our planning process is to show you alternative scenarios. Being debt free can allow for greater flexibility now and in the future with these scenarios. We work with our clients to find ways to pay off debts as soon as possible, but in concert with their other goals.
Some popular blog posts concerning debt management include:
Why We Prefer a 15-Year Mortgage