We talk about debt all the time, in different ways. The country talks about debt as well. For years we heard about the debt President Bush left us in and the debt that President Obama has allowed to increase. Yet, when you look at it, debt isn’t bad across the board. Let’s take a look at it.

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Having some debt is actually a good thing, if you trust credit reports and credit scores. Both seem to like individuals having debt, aka outstanding credit, and making payments on that credit. Strange as it seems, if you pay off all your outstanding debt and have none left over, suddenly your credit score starts going down. It seems like idiocy to me, yet it’s one reason why so many financial experts tell people to never cut up their credit cards, no matter how bad the terms end up being.

It works the same for the federal government. While no one wants the debt to be as high as it is, the truth is that countries trade in debt all the time. it seems that the country loves getting things done on the debt load of someone else. Think about it; every building that gets built is being built by a company that had to assume a certain amount of debt to build it. The stock market works on the premise that they play with other people’s money, and most of the trading is done not with real money, but perceived money, which in this case is a form of debt.

So, it’s not always bad… at least according some certain people…

When it’s bad is when the owner of the debt can’t pay on the outstanding balance. That’s when things start to cave in and the pressure builds. For nations that end up in this predicament, some of them just print more money, which leads to its devaluation. For the rest of us, doing that would put us in jail, so we then have to find other ways to work through the debt that we’ve accumulated. Having debt that goes into collections can impact your credit.

The best way for anyone to handle their debt, at least up front, is to never spend more than one can afford to pay on. People need to set limits on how much they’re going to allow their credit card balances to get up to in total. People need to set limits on how much “fun” spending they’re going to allow themselves to do when they have bills to pay. And people need to learn how to save some of their money for those times when they need an extra boost of some kind.

What this means is that ever-dreaded word budgeting. This is the only way you’ll know how much you have on hand, how much you owe to someone else, and how much is left for you to live and have fun with. That is, unless you’re like the couple that’s saving money to retire on at age 33 without budgeting because they can see how well their cash is growing, this should be your reality, at least in some form.

Debt brings a lot of pressure with it. More couples divorce because of financial stress than for any other reason, including infidelity. Feeling the pressure of not being able to handle one’s debt can cause depression and make some people act in irrational ways to try to make more money. Having a budget can show some people that they’re actually not in the kind of trouble they think they are, and if they are they can always find help.

How good are you at managing your debt?
 

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