Debt Free

Messy Christian is making that her goal. She has been reading Dave Ramsey and thinks she get her debt knocked out by the middle of next year.

In a somewhat related post, John is discussing poverty over at Locusts and Honey.

So I think that conservatives are right that many of the poor dig themselves in deeper. But conservatives tend to take a moralistic stance towards poverty that radically underestimates how much cultural context determines our ability to make good decisions.

Essentially, us folks in the middle class have been taught to make good decisions by our parents. Members of the lower classes often don't have that example and upbringing. It is a lot easier to make sound decisions when you were taught to make sound decisions in the first place.

My thoughts on debt? There seems to be three kinds: Manageable, Bad, and Worse.

Worse debt is high interest debt on depreciating assets. This is most credit card debt and would also cover other forms of short term loans like "pay day" loans. This is the one you never want to get into in the first place. You have quickly mounting debt on items that are steadily losing value. With debt like this, you can easily get "behind" and owe more than you are worth. You should try to avoid this debt at all costs. If you end up with too much of this, then try consolidating your debt at a lower interest rate.

Bad debt is low interest debt on depreciating assets. Car loans fit into this category. You should try to avoid this for of debt, but it may be unavoidable depending on your savings and the state of your finances. You can end up behind on this debt as well, so be careful and don't take out more than you can afford. If you have to get in this debt, pay it off as soon as possible. Try to avoid it entirely with savings.

Manageable debt is low interest debt on appreciating assets. This is essentially debt on an investment. A mortgage is this form of debt. While it's good to pay it off quickly, this debt isn't that bad. You aren't continually losing value. Even making minimum payments will get you ahead of the game. Just don't bite off more than you can chew.