Financial sovereignty is attained by understanding that debt is financial cancer, eating away at your future

There are only four situations that I can condone the use of debt:

1) Purchase of a home

It is very difficult to just show up and pay cash for a home, especially as a first-time buyer.  However, you do not want to be over leveraged and end up underwater with the loan if housing prices ever take a dive.  I recommend the 20% downpayment, or at least enough to be sure that you do not have to buy mortgage insurance.  Also, be sure that you could handle a raise in interest rates if you intend to take a variable rate mortgage.

2) Purchase of a farm, land, or investment real estate

Just as difficult as purchasing a home, buying farm land or investment property is another reason to use debt.  Granted, this is one area that people can get themselves in too deep, especially if they have a primary home mortgage too.  If the rental income or farm profit dries up, or there’s a massive spike in interest rates, you me be left with a payment that you have trouble keeping up with.

However, I am a fan of owning property in the long term, especially productive farm land that can earn you some income as well as provide you some food.

3) Purchase of a profitable business

It would take a long time to purchase a business for cash.  And by the time you can, you have missed out on a lot of profit and value growth.  I won’t go deep into business mortgages right now, but it is something to consider – after consulting the professionals.

4) Life saving surgery

If ponying up some money can help you jump the queue for some important surgery, well what are you waiting for.  Being debt free, having and house, land, and business are not really all that important if you’re dying or suffering from disease.  Don’t let the socialists in our country convince you that going to the USA or another foreign country for a medical procedure is a bad thing.  If you have worked hard for your money, and spending some of it will improve your life, then you should do it.  Good options for fast medical service are in the USA and Thailand.

But what about “Don’t Pay for 180 Day” in-store credit?

Do not use any in-store credit if you need to.  First, because the interest rates are high.  Second, because it allows you to buy things that you cannot afford or that you don’t need.  Third, because there are always hidden fees or costs to apply.

Now, if you are about to purchase something you need with cash, and you really do have the cash to buy it, then you could explore these programs.  0% or 0.9% car financing comes to mind.  But don’t trick yourself into believing that it’s a once in a lifetime deal.  The best deal on a car is the one you don’t buy.  Holding on to your old car for another year or two is your best bet.

What are your thoughts on debt?