September 3, 2013
Taking on debt when making a purchase should be limited to assets that appreciate over time. Why? Examples?
Taking on debt when making a purchase should be limited to assets that appreciate over time. Why? Examples?
You should only take on debt that provides you the opportunity to purchase an appreciating asset. You should not take out debt on depreciating assets, because these consumable items lose value immediately. Buying them on credit will only make the situation worse. Some examples of appreciating assets are: your personal residence, a business, and a college education. Some examples of depreciating assets are: clothing, electronics, furniture, home improvements/maintenance, meals, vacations, and vehicles.
Outstanding, Katherine. If a person can follow this simple advice they will be far ahead of the crowd. DO NOT take out debt on “stuff” that loses value immediately after buying it and continues to lose value over time. If you want “stuff” pay cash for it. If you don’t have the cash, don’t buy it. It really is that simple.