Some Debt For Thought...

Lately, I've been getting more questions from students about how to manage their debts and debt situations. I want to share some perspectives to empower anyone reading this to better understand debt, and to be better prepared for it!

Debt is debt, it's neither good nor bad! It's important to check your emotional connection with the word “debt” and the experience of having it. It's all about what does “debt” mean to you, and what role does it play as a part of your personal finance. 

I will not get too philosophical about debt, but will get you to be more personal with the subject. So let's break it down into a two main points to better understand:

1) Using/taking on Debt

 We use Debt to buy and invest in things we want & need. By doing so, as we have a good history of paying it out, it allows us to build our credit score, showing that we are responsible and a good risk to anyone/institution if they want to lend us money.   

We use/take on Debt for our education (academic, trades, new skills, etc), to obtain degrees, certifications, licenses, etc., to increase our value in the marketplace. The more knowledgeable and experienced we are, the more we can solve problems and/or provide better services and/or create new products, etc.  

We use/take on Debt to buy large purchases such as a car and the largest for most is a home or an investment property. These things generally improve our quality of life and the debt serves us for the long term. However, when most people make these purchases they are overwhelmed by its costs and debt obligation because they don't have a financial plan for them, at least not well prepared enough when the time comes.  

We use/take on Debt for other things like buying furniture, equipment (for our side hustle or for learning, etc) because they are important to us. 

2) Having/dealing with Debt

Having Debt for __________ (choose an example - fill in the blank) is all ok if we plan for it and it's within our financial budget/spending plan.  

With Debt, we need to rethink the definition, as Debt is only an issue if we cannot afford it or have a clear plan to pay it off. Like what I said many times, we need to define debt as "our inability to pay for what we owe."

For example, if we have a debt balance of $100K for example, but we have 250K in savings, we don't have to be concerned with our Debt. We can hang on to our money, not pay off the debt, but pay it over time and use those funds to continue to invest in our future plans and to finance our personal & professional development, education, investments in assets, etc. It's all about prioritizing our finances and our future focus goals with what we have and with what we can borrow, without overwhelming ourselves.

Thinking and having a clearer relationship with our Debts will empower us to make better financial decisions and manage our finances better too. Debts are part of your financial equation and our finances, so be clear of it, don't let it control your finances.  

From my perspective, when it comes to debt and problems relating to it, it's generally not the debt itself that is the problem but the person with the debt not being on top of their personal finances. It's so important to understand why you are getting into debt in the first place and if you have a financial plan to manage it? It's partly why I am dedicated to empower college students and anyone starting off on their own to learn and build a solid financial foundation for themselves first such that they can avoid the wrong mistakes most people encounter/fall into. 

Download The Financial Empowerment Kit and/or join for free to be a member and get access to all the tools and resources, so you will be able to master your finances!