The Myth of 'Good' Debt

[Cat Damiano]

The economic crisis and the tepid pace of the recovery have left millions of Americans deep in debt. And amid this slow recovery, many are struggling to make minimum payments to keep ahead of creditors.


The amount of debt the average American holds is staggering, compared with the average American salary. In its latest findings in 2010, the Social Security Administration calculated the average American wage index to be $41,673.83.


According to Creditcards.com, a website that tracks the credit card industry, the average American household holds $15,956 in credit card debt. The Census Bureau has determined than 60 percent of Americans own their homes; many of these people still owe money to a bank for mortgage payments. Estimates on the size of these payments vary, but most organizations say the majority of monthly payments fall between $700 and $1,700 per month.

On top of that, most Americans have to borrow money to buy a car. According to the auto website Edmunds.com, monthly car payments should average between 8 and 11 percent of monthly income, although many people pay more. College students are also forced to take out loans to pay for education. The Project on Student Debt has found that the average graduate of a four-year nonprofit university carries more than $25,000 in loans.
Based on these numbers, it seems almost impossible for the average American to be debt-free. But there are steep variations among these loans. Paying off some loans should be a priority. Others, while burdensome, can wait.


Read More Here:

The Myth of 'Good' Debt - Yahoo! Finance

[BustedBrokeBeaten]

For us when we made the decision to walk away from our drowning house, initially there was significant anxiety about how we will live without credit. At first, anxiety alone detoured us from making the decision. Since making the decision and subsequently having tanked credit scores, I personally have experienced a sense of freedom from being so attached/defined by my credit score. I've paid off literally hundreds of thousands of dollars of debt over the past 20 years and have very little to show for it.

For us, even when our credit score recovers we plan to stay credit free. We are quite comfortable paying cash for an older model vehicle. It's nice to only have the rent, the DISH TV, the cell phones, the electricity and the water/sewer/garbage bill to pay every month. We have plenty of money left over to put some in savings and still handle the car repairs and purchase of more expensive necessities. What would our economy be like if credit was something we simply used for emergencies instead of something we rely on for every-day needs.

My dad is 82 years old and the only thing he has ever purchased on credit was his house and cars. Otherwise, he has always paid cash. He has saved an enormous amount of money over the years by staying true to this practice. I wish I would have listened to him a long time ago, but I'm on board now!

[bubberrand]

When ever I hear the term "good debt" I know someone is behind it trying to convince people to fill the lender's coffers. Debt is debt, period. There is no good or bad. You want to live in enslavement and never be able to make choices in how you want to live your life? Then pile on a bunch of debt. They need to teach that bit of wisdom in the public school system. Social studies isn't gonna help you live your life, a little bit of teaching on debt and finance will.