Debt can help achieve your goals, but only if used responsibly
Let’s say this up front: we don’t hate debt. We just know it’s dangerous if not handled properly.
Not every loan is evil. You don’t have to pay cash for everything for your entire life. Used wisely, debt can help you achieve your dreams.
But we’ve seen over and over again that when debt is used recklessly, it can destroy marriages and relationships, ruin mental health, and keep you from having the kind of future you want.
So, let’s talk about good debt and bad debt. For more information, check out attorney Ben Matthews’ podcast, Debt Sucks.
When is debt dangerous?
In our experience, there are two reasons debt can take over someone’s life. The first is fear: if you’re terrified of debt, you’ll make choices controlled by that fear. The second is overconfidence: some people think they can treat debt like a harmless shortcut, until they can’t anymore.
Debt is a tool. It’s a way to rent money, and like anything else you rent, it has a price tag. The question is whether you’re using it to move forward—or using it to scrape by, or impress people you don’t even like.
Types of debt that can be healthy
- Mortgages: Used wisely, a mortgage can give you a little stability, a chance to build equity, and all of the independence that comes with home ownership. But it’s important to manage your expectations, especially in the current housing market. The low interest rates we saw a few years ago are a thing of the past. Don’t get into a bidding war or overextend to buy your dream house. A mortgage only makes sense if it’s what you can comfortably afford, not what the lender says you technically qualify for. Then, make sure you attack it early: pay an extra $100 a month, or pay every two weeks to get the equivalent of one extra payment per year.
- Auto loans: You need a car to get to work and live your life. Sometimes, that means you need a car loan. An auto loan is fine as long as it’s for buying what you need for transportation, not an identity. Don’t take on debt you can’t afford to buy a brand-new car that will lose a third of its value as soon as you drive it off the lot; if you must finance, get a new-to-you car that reliably gets you from A to B. What you really don’t need is a car payment that eats half of your paycheck. And in the long run, you want any financed car to be your last financed car; the goal is to at least borrow less each time so you can ultimately switch to paying cash.
- Student loans and business loans: These debts aren’t automatically bad, but they’re risky, because the result isn’t guaranteed. Whether getting a degree or starting a business pays off depends not only on your effort, but also on market factors and plain old luck. Especially in a shifting economy where industries are changing under our feet, do your homework: make sure you’re investing in your future with a clear plan and something you’re confident will make money.
The goal is “financial calm”
Many people ask us about a debt-free future. Being debt-free is a wonderful goal, but it’s not the only way to what we call “financial calm,” or “silent but wealthy.” What does that mean?
- Your money is working quietly.
- Your bills are predictable.
- Nothing in your financial life keeps you up at night.
If your debt is affordable, you have emergency savings, and you’re building wealth for the future, then you’re moving in the right direction. The real enemy isn’t debt, it’s financial chaos.
How to handle debt responsibly
If you’ve taken on debt, we recommend using the “rockpile method.” Write down every debt, big to small, like you’re building a pile of rocks. Once you have your bases covered and a little money put away for emergencies, attack your debts one by one. Pay the minimums on all but one, and throw every dollar you can at one. When it’s gone, roll the payments to the next one.
The upshot is that you’ll pay off your debts faster than you promised, which saves you thousands of dollars—and keeps you in control of your money.
If you’re in overwhelming debt and need a lifeline, we can help
While debt isn’t always bad, it’s always dangerous—and if you’re drowning in debt, you may just need a lifeline. Bankruptcy can be the financial reset you need.
If your debt feels like it’s running your life instead of supporting it, we can help you take back control and move forward with confidence. Give us a call or contact us online to talk to an experienced attorney at Benjamin R. Matthews & Associates, LLC.
"Mr. Matthews and his team took the time to understand my situation and helped to understand the process. Everyone in the office was respectful and patient with my questions and concerns. If the need arises in the future, I will definitely be giving them a call." — Wendy W., ⭐⭐⭐⭐⭐