Good or Bad Debt?

Seth Godin writes a blog that I’ve been following recently. Today he wrote a great post on consumer debt. That is, going into to debt to buy things that decline in value. Here’s the summary: It’s often ok to borrow money for something if it’s going to increase in value, productivity, or profit. In the end you have more than you started with. Buying a home is usually a good example of this. Not every mortgage is a wise choice, but many are. Especially in the long term. Here’s a Rent vs. Buy Calculator to help you figure out some of the nuts and bolts.

It’s often not wise to borrow for things that decline in value. The minute you drive that new car off the lot it’s lost 20% of its value. The clothes you bought on your credit card aren’t going to get more valuable until they’re considered vintage finds 30+ years from now. Plain and simple, too much bad debt buries you.