So-called “Good” Debt and Your Stay-at-Home Partner

BNN recently featured a Bank of Montreal survey with the headline that Canadians are taking on more “good” debt. Oh nice. So everything is fine – nothing to see here – move on.

Give me a break. I understand the logic of what they’re saying, but I disagree with the premise that there’s really such a thing as “good” debt.

The survey called borrowing for the purchase of a home, to do renovations, or for education good debt. Well – maybe. But most of these CAN be done with cash and without taking on more debt. The only exception would be the purchase of a home. But only in comparison to taking on debt for vacations or credit cards, as two common examples.

News flash: At the end of the day you still need to make the payments. It’s “good” if the rate is really low, bad if it’s the 20% credit cards. But debt is debt. It stops or reduces the amount you can save, because you only have a finite amount of net income. So, every time you borrow, you’re taking a voluntary pay cut: Same pay, minus the necessity bills minus one more new payment now.

It’s good or at least “gooder” if it’s a fixed loan where you have three, four, or five years and there’s an end. It’s never good when it’s interest only, such as a line of credit where the average person owes over $35,000 and owes it for more than 14 years. It may have started off with the sales pitch that it’s “good” debt, but when you add up all the interest and time to eventually pay it off, it was a horrible idea.

And one more thing, if you have a spouse who is a stay at home parent with your kids: A new study just found that a stay at home parent would be fairly compensated at $117,000. So if your partner is a full time parent, do not begrudge them their “me” money, or question their personal spending unless you want to pay them what they ought to get paid! You really need to read the Money Tools relationship chapter: When you got married, it stopped being  “your” money or “their” money and became “our” money.

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