Yes, all things being equal, it is best to spend within your means. But our financial needs don’t always coincide with our ability to pay for them in full, particularly in young adulthood, and throughout life.
Sometimes, it makes good financial sense to borrow today for something that can significantly improve your life or your family’s, now or in the future:
- A new house (a mortgage)
- Higher education
- A safe, dependable car for commuting to work
- A loan for a start-up business
- A home improvement (often through a home equity line of credit, or HELOC)
Other times you may want to borrow short-term credit, such as a credit card. This can make life more convenient by helping you avoid having to use cash and segregating financial activity into separate accounts.
While credit may be unavoidable, it’s critical to remember that credit should only be used as long as you can afford the overall cost and make your payments on time.