Debt Isn’t the Enemy

People with serious debt problems may try to do too much too fast and then give up in despair. Or they might pay off the wrong kinds of debt, stranding themselves with too little flexibility to survive a financial crisis. In their zeal to pay off debt, some people neglect other important goals, such as saving for retirement, a home, or college, and ultimately end up hundreds of thousands of dollars poorer than they might have been.

Worse yet, they might be encouraged to continue fighting a battle they simply can’t win.

If you’re having debt problems, you need information, advice, and a clear-eyed assessment of your financial situation so that you can make the best choices for yourself and your family. Short—term fixes and inspirational slogans might help, but you shouldn’t choose them at the expense of your long—term economic health.

Even if you’re not in a crisis, it will help you enormously to view debt for what it is: a financial tool that’s virtually essential for building wealth, reaching your goals, and living happily.

Think about it. Few of us could afford a home without taking on a mortgage, and many couldn’t swing college educations without the help of a few loans. Consider the payoffs:

The massive growth of the mortgage industry has helped boost the U.S. homeownership rate to nearly 70%, compared to less than 44% in 1940. That, in turn, has helped millions of families get richer: The median net worth for homeowners in a recent Federal Reserve study was $171,700, compared to just $4,800 for renters.

Student loans helped more than 50 million people attend col- lege, an investment in their futures that pays off in higher incomes and greater productivity. One study found that col- lege graduates usually recouped the cost of their education, including the earnings they missed while attending school, by the time they were in their early 30s.

Debt also can help you survive a job loss, buy a safe car for your grow- ing family, or even start a business—and sometimes all three.