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  • Writer's pictureLeon de Leeuw

Don't let debt catch you

What is considered to be 'good debt'? Financial clutter is all around us. We can take out loans. Take out all sorts of insurance to the point of overinsuring ourselves. Advertising pulls our attention away from the things that matter most. Credit cards are used to buy pairs of shoes we don't need. The interest rates are high and yet we keep using the card. People have a lot of stuff. It's collected through their lifetimes and sometimes, they go deep into debt to get it. However, is there such a thing as good debt? You can divide all things into 'need', 'want' and 'like'. Use this division before buying anything, even more so if you're about to go into debt for your purchase. Then don't trick yourself into thinking you need something you actually don't. Three pairs of shoes should really be enough and with some repair, shoes can last for years. You get creative when saving money.

Most people will agree that going into debt to buy things you don't need results in 'bad debt'. It surely is. To give an example, should purchasing a house be good debt? You do end up owning a place instead of just renting? Keep in mind that a property is not yours until the mortgage is paid off. It can be claimed by your bank and you'd have nothing left. If the property is eventually paid off, it's yours. Is the actual terrain yours though? Who says the house you own can't be broken down for a new highway, which is planned to run through your backyard? Your asset can both increase and decrease in value. You have a lot of influence over increasing it, such as by installing good kitchen equipment, maintaining the roof and giving the window frames a fresh layer of paint every once in a while.

The decrease of value is something you can do little about. A highway, not in your backyard but just a kilometre away, can significantly disrupt the quietness of your area. It can affect your quality of sleep and so the overall value of your house would go down a bit. Noisy neighbours, lots of time in maintaining the garden and what about all the taxes you pay over the thing you thought you'd own? Property taxes are no joke, depending on the country you live. You even pay for the waste water, just as for the municipality you live in. Taxes make sure we all live in a safe and comfortable area. It keeps structure in society. Yet with all the costs that eventually run up higher than expected, it can feel overwhelming to the point that the house ends up owning you.

It's likely the biggest debt you'll ever take on. You get rid of your college debt, then take on the next one, and the next. A credit card, a car, a house. Debt upon debt. You'll spend hundreds of thousands just to follow the trail millions of others walked before you.

Still, people rarely stop and question the choices they made. They deprive themselves of free time, divided from the family they say they love. Endless workweeks and they don't even enjoy the homes they own anymore. And what's the outcome? You're in debt, not only in terms of money but debt to yourself. Enslaved by yourself. Building up a sleep debt. Sleeping less and less builds up over time, just like the interest rates.

Work takes the largest chunk of your day. You'll be home when the sun sets but to exhausted to actually enjoy yourself. Slowly, the debt you went into turns into that nightmare you wish you wouldn't have each night. You'll lie wide awake in bed at night, looking at the ceiling of the home you own. It now feels like a cage, with years more to pay off the pile of bricks. You made your memories there, the children had their birthdays and their first baths. You wouldn't leave now. It would hurt too much. The place is renovated and you think its value must have increased. One day, you'll sell for twice the profit. The sacrifice you made, working and giving up on exercise, good food and eventually your health, are conveniently overlooked. You feel like you do your family a favor, giving up your health for them. But who can look up to a man that sacrifices himself to the point that he turns unhealthy? What sort of image is that? A respectable man takes care of himself as much as his family.

What are your values? Taking one more debt to provide a carefree childhood for the kids? Rightly so, they deserve it. Yet, couldn't it have been done without debt, or with less debt? As your career took off and you made more money, your spendings increased. You overworked yourself into the little hours to make a promotion and so you did, to make sure the kids could get a good education. To make one more down payment on the house. You think these are good debts, you make sure to convince yourself they are. You forget about the fact that you spent tens of thousands for a college degree you never used when you got into the real world, yet you're about to put your kids through the same. More so-called good debt.

By the time you retire, the house will be paid off. No more debt, you say, and time for your pension. You now own your home, which is way too big because the kids moved out. You'll have a harder time maintaining the garden and eventually it gets overgrown. Or, you pay more to have it maintained. To renovate the house you said you'd own. Yet, do you really own it or are you in a very comfortable cage? Was it all good debt, if you're indebted to your dreams now? Your dream of sailing around the world? Perhaps there is no good debt.

Better start small, rent a place, don't buy what you can't pay for on the spot. Or, don't borrow money you can't pay back in a foreseeable time. There's no reason to retire poor. There's zero reason to live in debt, especially in debt to yourself. To your dreams, your sleep, your longing to see the world. Don't buy what you can't afford and don't borrow what you can't pay back. Said so often yet done too little.

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