Going Into Debt Can Be Awesome
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AJU_photography / Flickr We often talk about the dark side of credit, but it is actually a wonderful invention. In a world where nothing is free, being able to borrow allows anyone to pursue their otherwise impossible dreams.
Borrowing startup capital allows entrepreneurs to become important business owners with just an idea. Borrowing to go to school allows those who grew up with under less priviledged situations to pursue careers that require expensive training. Borrowing, when executed properly, can help achieve the impossible.
But nothing is free in our world. The cost of borrowing is much more than the monthly payment. It's an obligation that demands sacrifices in other parts of one's life. A recent New York Times article discussed the common scenario of bringing debt into a relationship. It was easy to call the fiance that ended his engagement with Ms. Eastman in the story cruel when he found out all the money she owed, but who could blame him if the debt loan was $170,000 with no real way of paying it back?
Or what about the other couple in the story? It's admirable for Mr. Kogler to make the sacrifices for Ms. Tidwell, but if you are in serious debt and expect anyone to give up running his family business, move to another country, possibly forgo career opportunities in the future, and alter plans for their children, you are just as cruel -- if not a little delusional to expect that's the norm.
Borrowing money takes sacrifices. The student would need to live modestly in order to pay off all the student loans that she took out, but her children may be able to start off their life with a more solid footing.
The business owner may strike it rich, or he may be servicing the loan he took out for the next decade. At the very least, he has a chance, and he was able to do what he really wanted.
Money is money. There are no emotions involved. Credit won't guarantee success, and it is up to us to make it happen. Borrowed money opens up possibilities, but it is up to us to make sure the sacrifices are worth it. Taking out a loan is a big decision, but it is our duty to run the numbers and make sure we can afford the consequences.
Next time you decide that it's okay to borrow money to make a purchase, you ought to think of Ms. Eastman.
Debt is powerful. It could be an enabler or a destroyer. Which one it becomes is totally up to you.
What are you willing to go into debt for?
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That is such a true statement. I never thought about it that way. People often talk about how evil debt is and I bought into it but without student loans, a lot of people wouldn't have the start that they have, the car that they have or the house that they have. At the end of the day, it is about wise decisions but I still think cash, savings and discipline can bring you a lot more.
I also think that loans/credit/debt all feed in to make things cost more. If people had to pay $24,000 out of pocket for a car or college, the price would have to go down because not a lot of people would be buying. Between 1910 and 2010 Fords went from being $650 to $30,000 and I think inflation was a small part, technology was a slightly larger part and credit had the biggest effect on the jump in cost.