How much debt is too much?
The average American has $16k in debt, down from $35k in 2008. The ability to borrow money is important in all economies, but borrowing more than you can pay causes all kinds of problems (as the various debt crises around the world expose). How much debt is ok? How much debt is too much? How do you decide for yourself when its warranted to go into debt to achieve something? What’s a story you can share about borrowing something, perhaps money or time, from someone else?
Well–this is a tough one for me. I am assuming in the debt quoted above they are excluding mortgage debt. We have had multiple financial setbacks here. The housing market in my town dropped like a stone, so our home value dropped by about 40%.
There have been multiple layoffs, the need to pay for COBRA medical insurance multiple times, and now several MAJOR medical emergencies. Thank GOD we at least did have medical insurance. Thank GOD we have jobs right now. Of course, because of all these things we have higher than average debt.
How do you decide when it is warranted to go into debt? Obviously, if there is an emergency, or you are trying to maintain medical insurance, it is warranted. Obvious to us, anyway. Obviously for little luxuries, not necessary to go into debt.
College education? Partially ok to go into debt….partially better to use the strategy we used for our son, and the one I used with one of my clients and several of the students I tutor.
I won’t go into it here–you can check my other blog for that. Comment back if you want more information.
As far as our nation’s debt … at this point I think we need to start paying down our debt before lending other countries money. But really, I don’t believe I am fully informed about this issue. All I have to go on is what the media has described. Let’s just say I cannot rely on just that in order to form my opinion.