Avoid Easy Debt: Wants VS Needs

Having access to easy credit is a good thing. However, making use of that easy credit might be. Taking on a lot of debt is dangerous, meaning that you need to consider how it matches up with your wants and needs.

Why Is Too Much Debt Bad?

Too much debt causes numerous issues. In particular, it is expensive. After all, you are going to be paying regular interest, meaning that the final total is going to be much higher than the initial principal. If you aren't careful, you could wind up having to make cuts so that you can make your debt payments. Even worse, you might become incapable of making those debt payments.

Understanding Wants Vs. Needs

Wants are things that you would like to have but don't actually need. In contrast, needs are things that you need to have whether you want them or not. Taking on debt for the purpose of satisfying wants is always a bad idea because their very nature means that you can afford to wait.

What Is Good Debt?

You should do your best to make sure that your debt is good debt. Essentially, a debt can be considered good if it will either increase your net worth or improve your life in a truly significant way. The classic example of good debt would be a student loan, though that is assuming that you will actually be able to launch a successful career using it. In contrast, car loans tend to be seen as being bad debt because cars depreciate so fast. Unsurprisingly, loans for consumables are seen as being even worse because cars can at least offer transportation convenience.