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The Debt Free Lifestyle

The Debt Free Lifestyle

Many people have been taught that you cannot get ahead without debt. We are also inundated with advertising telling us we can have anything we want. All we need to do is put it on our credit card.

We have become an impatient society, we want it right now. We have lost the ethic of working for what we want.

It is not how much money you make; it is what you do with it. By living without debt you can actually have a higher income since you are not paying out interest, you are actually getting paid interest on invested money.

All debt is not created equal. We will classify them as good debt and bad debt.

To simplify the classification we will say that good debt is a loan for something that you could sell at any time and repay the debt. This narrows down good debt to a home loan and possibly a home equity loan.

A bad debt, of course, is a loan on anything that will lose value.

Let's take a look at some debts that we would consider bad debt.

Home equity loans are in the gray area. They could be considered good debt if they are used to repair or improve your home, but you would be a lot better off to just save up the money for the project. Home equity loans become bad debt when used for purposes other than home improvement or maintenance. In other words a bad home equity loan is for anything that does not add to the value of your house. Do not jeopardize your home by taking out a home equity loan on unnecessary items.

One possible good use for a home equity loan is when the interest rates are low. You can use a home equity loan to refinance your mortgage. Home equity loans generally have lower costs than conventional home loans.

We consider school loans bad debt. If you finish school, get a good high paying job and then attack the loan like mad, a school loan may work out. The problem is that there are too many things that can go wrong. At best, even if you do graduate and get a good job there are always a lot of other expenses at this time in ones life. You are really behind financially when you start your working life in debt.

Auto loans are bad loans that have become common practice to us. We pay interest on a vehicle that will only be worth one half of its original purchase price in five years. Lately it has also been common for us to borrow more than a vehicle is worth. We can trade a car in that we still owe on, and roll that owed amount over into another vehicle. This gives us a loan amount that is higher than the value of the car that we drive away. We have lost our capacity to say NO.

Co-signing is a bad debt that usually and unfortunately involves family. If someone cannot qualify for a loan at a regular lending institution, they should not get a loan. The fact that they can't qualify for a loan elsewhere should tell you that they are a huge risk. Use this opportunity to teach them how they can get what they want by working harder for it and delaying the purchase.

If you want to get off of the debt treadmill, you must run as far away from debt as you can. You cannot use debt to get out of debt. Even if you do, you have not changed your habits; you must change your lifestyle.

John Cook is family oriented and likes to help people get off and stay off the debt treadmill and secure the financial future of their family. You can read more about securing your families finances at his website http://www.financeforfamilies.com.

In The News:

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table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://economictimes.indiatimes.com/News/Economy/Policy/Andhra_pays_for_fiscal_profligacy_may_be_denied_debt_relief/articleshow/3782142.cmscid=0ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNHSR16-I2m4ABdosNOJtpZ4I9JNcgAndhra pays for fiscal profligacy, may be denied bdebt relief/b/abrfont size=-1font color=#6f6f6fEconomic Times,nbsp;Indiafont size=-1 class=ima href=/a/fontnbsp;-/font nobrDec 1, 2008/nobr/fontbrfont size=-1In FY08, the state got a bdebt/b-brelief/b of around Rs 1889 crore. “We have been attaining a revenue surplus despite huge allocations for revenue expenditure b.../b/font/div/font/td/tr/table

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table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://rismedia.com/wp/2008-12-01/know-the-details-of-the-mortgage-forgiveness-debt-relief-act-2/cid=0ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNFf95T_jMhZZiNMle61PApkyZ4i6gKnow the Details of the Mortgage Forgiveness bDebt Relief/b Act/abrfont size=-1font color=#6f6f6fRisMedia.com (press release),nbsp;CTfont size=-1 class=ima href=/a/fontnbsp;-/font nobrDec 1, 2008/nobr/fontbrfont size=-1b.../b in December 2007, Congress stepped in to provide temporary brelief/b in the form of forgiving this bdebt/b, but only for the 2007, 2008 and 2009 tax years. b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.expressbuzz.com/edition/story.aspx%3FTitle%3DGovt%2Bto%2Brelease%2BRs%2B21.43%2Bcr%2Bfor%2Bdebt%2Brelief%26artid%3D1lszTVk554Y%3D%26SectionID%3D1ZkF/jmWuSA%3D%26MainSectionID%3DfyV9T2jIa4A%3D%26SectionName%3DX7s7i%257CxOZ5Y%3D%26SEO%3Dcid=0ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNE2CkATxpItPQYjAkjWI_ucY5yYagGovt to release Rs 21.43 cr for bdebt relief/b/abrfont size=-1font color=#6f6f6fExpress Buzz,nbsp;Indiafont size=-1 class=ima href=/a/fontnbsp;-/font nobr19 hours ago/nobr/fontbrfont size=-1THIRUVANANTHAPURAM: As per the recommendations of the Farmer’s bDebt Relief/b Commission, the Government has disbursed Rs 14.11 crore so far, and it has been b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thisdayonline.com/nview.php%3Fid%3D129604cid=0ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNHK2vRHse5RXzfA_hTB_NHpFtsuMgHIPC: Togo Gets bDebt Relief/b/abrfont size=-1font color=#6f6f6fTHISDAY,nbsp;Nigeriafont size=-1 class=ima href=/a/fontnbsp;-/font nobrNov 30, 2008/nobr/fontbrfont size=-1The statement said that Togo would receive interim bdebt relief/b from certain creditors, but in order to qualify for irrevocable bdebt relief/b at the completion b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21993683~pagePK:64257043~piPK:437376~theSitePK:4607,00.htmlcid=1276399584ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNEwCven_lY2kMGbFYHx2hPCJIdnuAHome gt; News gt; World Bank Launches Facility to Prevent .../abrfont size=-1font color=#6f6f6fWorld Bank Group,nbsp;DCfont size=-1 class=ima href=/a/fontnbsp;-/font nobrNov 30, 2008/nobr/fontbrfont size=-1The Bank also called on donor countries to meet their bdebt relief/b commitments. “The bdebt relief/b provided by the World Bank and other creditors to heavily b.../b/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.monitor.co.ug/artman/publish/business/Parliament_warns_govt_against_external_debts_76108.shtmlcid=0ei=9uI1SfqVEoHI9ASujNyvDQusg=AFQjCNGy2gXJvQI34zpwQ7A0kupHU3a8qwParliament warns govt against external debts/abrfont size=-1font color=#6f6f6fDaily Monitor,nbsp;Ugandafont size=-1 class=ima href=/a/fontnbsp;-/font nobr3 hours ago/nobr/fontbrfont size=-1b.../b 100 per cent Uganda’s bdebt/b under the Highly Indebted bDebt Relief/b initiatives and the 2006 Multilateral bDebt Relief/b initiative less than five years ago. b.../b/font/div/font/td/tr/table

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