Reden Bravo, Negosentro | Avoiding debts in the first place – and paying them down with absolute efficiency – is an admirable goal that most people share. Not only can the presence of debt suck away at our long-term ability to save and prosper financially, but it can cause mental and even physical anguish as well.
Even though debt is most often a bad thing to possess, there are some situations where acquiring some debt is necessary for prosperity. At the same time, situations, where debt is required to earn more income over the long run, can also be justified.
Let’s talk about three specific situations when it is OK to turn the other cheek on the presence of debt and embrace it for a better life.
Pursuing Higher Education
One of the biggest reasons young people start their lives with so much debt is due to student loans. The cost of college continues to skyrocket, with traditional university tuitions exceeding annual median incomes in some cases.
However, pursuing a degree with the goal of snagging a better career often makes sense. Whether you’re planning to earn your masters in criminal justice online from the University of Cincinnati or are seeking an MBA from your local college, in most cases, the difference in lifetime earnings can be hundreds of thousands of dollars – and that’s after paying back the loans.
Just be careful that you do not pursue a degree that offers a low return on investment. Some degrees provide better ROI than others (click here to see which ones offer the best returns).
Starting a New Business
Some of the greatest business ideas of all time started as dreams in someone’s garage. While not every business idea is great – and in fact, many businesses do fail – a concrete business plan coupled with a great idea can generate a huge return on investment.
When contemplating whether to start a new business, debt is one of the biggest considerations. How can I afford to fund my labor costs? Where will my budget come from? These are important questions – and sometimes, the answer is in debt.
Before borrowing any money for a business idea, however, it is vital to have a sound business plan, an idea that has been evaluated by multiple experts, and the honesty to ask yourself if you can truly follow through with the plan.
Buying a Home
For many, settling down is a sign of fiscal maturity and stability. For anybody who is currently renting, there are a number of reasons why such a situation may work better in the here and now. However, for those who are stable in their careers and family lives, buying a home can be a valuable investment.
By taking on debt in the form of a mortgage with good terms, the home is likely to accrue in value at a faster clip than the cost of the loan plus interest. Buying a home is one of the largest commitments anybody will ever make, though, so it’s important to research properties and loan terms extensively before committing.
Not all forms of debt are inherently bad, but having any form of debt without a guarantee for bigger long-term returns should be avoided. In the case of pursuing higher education, such as an online CJ degree, buying a home and/or starting a new business, the debt most definitely can be justified – assuming you’ve done your homework.