Ramsey County

Making $ense of Dollars and Cents

August 2005 - Number 4

Good Debt?

          Good and Debt are two words that don’t seem to fit together.  Most financial advice is based on the concept that people want to get out of debt and even avoid it entirely. Yet there are times in our lives and certain large expenditures – a house, a car, college tuition – when debt is unavoidable.  The goal then, is to make sure the debts we have are “good” debt.

          Before entering any good debt arrangement, you carefully review your current financial condition and are conservative about your ability to pay on your debts.

          There should be a reasonable opportunity to recover the debt in the future.  A house will appreciate in value so it’s value is greater than the amount of the mortgage.  The college tuition debt will be able to be repaid by a college graduate who typically earns twice the salary of a high school graduate.  A business will generate more income after the expansion project, which is being financed by a debt.   All are ways a debt can grow money for the future.

          Good debt does not tie up too much future income, even if it is affordable today.  A debt goes bad when it ties up resources that are needed later for other things. 

          Under these guidelines, most consumer or credit card debt is not good.  The next time you pull out the credit card or are ready to sign on the dotted line of another loan paper, ask if you’re putting yourself into a good or bad debt situation.

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524 4th Ave NE #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - ramsey@ndsuext.nodak.edu