Decide If Debt Is A Good Or Bad Decision With Two Simple Questions

Debt is a part of life, whether we like it or not. Sometimes, it’s helpful or necessary, and other times it’s life-crippling for no good reason. You can figure out which one a particular decision is with two quick questions.

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Personal finance blog Money Ning suggests that you can determine whether debt is “good” or “bad” by asking yourself:

1. Is the debt temporary or a lifestyle?
2. Is it worth it?

Buying a car, for example, is temporary and worth it. Buying a new car every time you pay off your loan just to have something newer and shinier is a lifestyle and probably not worth the extra expense:

Look at your own debt patterns. Do you have the habit of going into debt as a crutch, and as a way to project your lifestyle beyond the reach of your income? Or do your debts represent responsible, thoughtful decisions to invest in your present and future financial success? Can you feel at ease about your debt, confident in your financial stability, credit rating, and game plans for payoff — or are you embarrassed to admit what (and for what) you owe?

Debt isn’t inherently evil, but it does need to be justified. Obviously, whether something is worth it is a complex question in itself, but if your purchase can pass these two tests, you can have a good idea about whether this debt is going to be a good or bad decision.

2 Questions to Determine If Your Debt Is “Good” or “Bad” [Money Ning]