How To Keep Good Debt From Turning Bad


Financial woes permeate the news today. While politicians argue, foreclosures and bankruptcies proceed at record high levels, and even people with jobs are being overwhelmed by the amount they have borrowed. While the down side of debt has become painfully obvious, there actually can be beneficial results from owing money.

In the era before the current rash of foreclosures, taking out a mortgage was viewed as a positive thing. Even with today’s stringent lending standards, borrowing money for a new home can make sense. In many cities, it now costs less money per month to buy when compared to renting the same property, and as time passes that gap will grow even larger with inflation.

Home ownership builds equity, and ultimately financial worth. It results in a sound credit record when payments are made in a timely fashion. Purchasing an automobile is another major way to establish and maintain good financial standing, and also helps build a good payment history. Even credit card debt can be a positive financial indicator under certain circumstances.

A sudden loss or decrease in income, however, can erase those advantages. One positive result of the current financial situation has been a reduction in personal debt, simply because so many people were living beyond their actual means. Reducing that debt level while maintaining a respectable credit record is the key to financial survival, and demands personal sacrifice.

As difficult as it may seem, getting through this type of income reduction can be beneficial. When dealing with good debt gone bad, skip the inevitable guilt. Owing money often causes anxiety and depression, and adding to that burden is unnecessary. Cut up those credit cards, no matter how painful, and make no new purchases until you can afford to pay for them.

Most people fall into personal debt over a period of time by buying things they want, but actually do not need. Think frugally, and take advantage of bargains wherever possible. Use the Internet to shop for cheap car insurance, for example, and find the lowest rates for your driving needs. More importantly, use cash when shopping, and stop when it is gone.

While bankruptcy may be a good decision under certain circumstances, it take years to recover from financially. In order to keep good debt from becoming unbearable, make a conscious decision to preserve the integrity of your finances, no matter how meager. This may take some time, but in the end you will emerge from this era in better and stronger shape.

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