Debt Consolidation Counseling

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Debt is a transfer of money between two parties. It also implies that the loan will be paid off at a future date, according to the pre-specified terms. Almost every major purchase in our life will accumulate debt. Of course if the item is small enough, we can pay off immediately and not see any long-term debt. However for the larger items that we cannot pay for with cash, we can be in debt for months if not years

That's not to say that debt is a horrible thing. A lot of people only feel comfortable paying for something up front such as driving used cars, renting an apartment and paying for school only when you have the funds to pay for it up for. Every item you'll ever own will appreciate and depreciate in value over time. Cars will lose 10% of their value the moment it leaves dealerships parking lot. If you sold your vehicle right out of the dealership parking lot it would not pay enough to satisfy the loan. Even if the driver waits for many years before attempting to sell it, they still might not receive enough money to cover the extent of the loan. You might end up having to take an extra loan just a cover your original auto loan. This is a good example of how debt can be very bad. To counteract this, an excellent financial rule is not going into debt over something that loses value over time.

On the flip side, the debt could be invested in the items that appreciate over time, Such as the home buyer's market. It is a complicated process trying to figure out if you can make money, buying a home. A good rule of thumb is if you are buying in a sellers market and selling in a buyers market you'll be able to turn bad debt into good debt. Compare this to renting where you get no tax deductions in your monthly payments and are not contributing to anything. However, for people who own a home and are in the 25% tax bracket, they will use about 75% of the interests that they pay each year. Deciding if you want to take on a house or continue renting is a very tough decision, each one comes with their own pros and cons.

In college, more students are pushing the trend of working first and then going to school so that it can be paid for. Certainly for young students debt can be scary prospect but looking at the difference between salaries should be the reasoning behind the decision. For instance, if you are making $15,000 when entering college and $50,000 afterwards, you are costing yourself $35,000 by delaying your graduation. This is not a bad investment to make at all.

Remember the golden rule about acquiring debt: Will it pay for itself or not?

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