This season, we’ve looked at debt from a different perspective. So often, we believe that debt = bad. Even worse, our society often views it as a moral failing. The reality is that debt is sometimes necessary—and it can even be a tool to help you better your finances. Listen to our season wrap up with more perspectives on why debt may be a necessity.

Some of the things we bring up include:

* How the rich use debt to borrow and spend using stocks and other assets as collateral and to avoid selling anything and reducing taxable events

* Our propensity to consider what rich people as superior while doing the same thing as a poor is considered inferior or “trashy”

* How the financial order of operations might work for some people, but can be overly prescriptive and doesn’t always work if you run into a problem

* Much of the “regular” personal finance advice works best if nothing goes wrong for 20 years

* Concerns that prescriptive finance a la Dave Ramsey is making its way into some schools

* There’s a lot of “financial porn” out there that glorifies strategies that are inaccessible to most people, even though those they feature are outliers

Financial strategies that include debt

We featured a few people who shared their stories of how debt is necessary in some cases, including some of their own stories of using debt as a financial tool:

* Brynne Conroy

* Tiffany Grant

* Dustin Heiner

* Deacon Hayes

And don’t forget to check out our recommended resource from Dana Miranda of Healthy Rich, Dealing with debt without shame.

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* Sarah Li-Cain

* Miranda Marquit

In the last 20 years, tuition costs have soared in the U.S. In-state tuition at public universities has increased about 158 percent during that time. Long gone are the days that our boomer parents reminisce about, you know, when you could work for a summer and save up enough money to cover tuition for a full year of school.

Many of us, especially Gen Xers like me and millennials were told to go to school and get a good job. Even with student loans, our parents told us it was worth it. Surely we'd get good jobs and be able to pay off the student loans with ease. So let's take a look at student loans. Let's talk about the realities of where we are right now and how it's okay. If you don't plan to pay off your student loans early or even at all.

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This episode dives into personal loans and how they can be helpful for managing cash flow and how sometimes debt is a lifeline for some folks who need a leg up.

We cited information about debt, specifically student loans. Here’s where we got it:

* Lending Tree personal loan statistics

* Credit card trends before and after the pandemic (Government Accountability Office)

* Bankrate personal loan rates

* Bankrate credit card rates

* Reuters reports credit card debt topping $1 trillion

* Clever survey results: people using credit cards for necessities

* New York Fed household debt

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* Sarah Li-Cain

* Miranda Marquit

One of the biggest rules in personal finance is to buy a used car with cash. You hear stories about how your car loses value as soon as you drive it off the lot. That used car has already seen its biggest depreciation and borrowing just makes it all worse.

But what if it makes sense to buy a new car with debt, as long as you acknowledge what you’re doing and you have other plans for your money?

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Miranda’s strategy for buying a car

We talk about how Miranda manages her vehicle purchases:

* Buy a car with low-cost financing (60-month loan)

* In 2001, 1.9% APR

* In 2021, 2.49% APR

* Keep the money she would have used to buy a depreciating asset in the stock market, where it earns more than what she’s paying on the debt

* After 8 to 10 years, use the car as a trade-in for the “down payment” and finance the next car at a low rate

It’s important to note that this approach works best if you can get a good rate. However, in some cases, you need the car for work and might need to finance a used car at a higher rate just to get access to the transportation you need.

Sarah has also used a loan to get a car. It was more convenient and easier than getting a cashier’s check from the bank. Her approach was to pay off the loan within a few months. But she maintained flexibility to get the car and keep the loan if the money ended up being needed for something else.

Lifestyle factors

We talk about lifestyle factors that might influence how you buy your cars.

* If you like getting cars more frequently, leasing might not be a bad option.

* If you expect to drive the car for a short period of time but want to sell it, buying it with cash can make sense.

* Think about how you use your cars: work, travel, family, etc., and make a plan that fits with your lifestyle.

* Carefully evaluate whether financing a car works (or is required) in your situation.

Financial resources

We encourage people to check out the following resources before getting a vehicle:

* CFPB page on auto loans: https://www.consumerfinance.gov/consumer-tools/auto-loans/

* CFPB page on buying vs. leasing: https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/

Big thank you to Ashley Barnett for sharing her story! Check out her LinkedIn profile if you’re looking for a top-notch content director or check out her Hit Publish course for writing better content.

Consider supporting us by upgrading to a paid subscription here (so we can continue to keep doing this work)

Or, for a one-off donation, buy us a refreshing beverage on Ko-fi.

And make sure you check out our websites as well:

* Sarah Li-Cain

* Miranda Marquit

Paying off debt early is considered a “guaranteed return.” But what if you can get better returns elsewhere? Could you use the “extra” you’d put toward paying down your mortgage for other financial goals, like retirement, investing, saving for college, going on vacation, or reaching some other goal?

While paying off your mortgage early is a noble goal, it’s not the only way. In this episode, we tackle some of the realities—including the reality that not everyone lives in an area where home prices appreciate dramatically over time.

For stats and resources mentioned in this episode, head to itdoesntmakecents.com

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