Debt is a bad idea

At any age of your adult life, debt proves to be one of the worst ideas for building wealth and creating a stable household. From student loans in your early 20s, car and consumer loans, debt acts like an anchor on your income and prevents your family from building proper wealth. The only except is a properly-sized mortgage with 20% down and a 25 year amortization.

Student loans sounds like a good idea – invest in yourself in your early 20s to pay back from higher income earned from a Bachelor’s Degree. Too many graduates then spend the next 10 to 15 years of their working life weighed down by this debt. It leaves them unable to save properly, prevents them from saving for a down payment on a house. All this to afford a nice lifestyle during university. Tuition fees in Canada are modest enough and the location and quality of local universities that a good education can be had from working a part-time job, living and home and saving money through high school.

Once graduated, you start earning an income, you want to stop living the pauper life of a student. So you finance your new car, new furniture and that 65 inch TV. Next you realise that with rent and your debt payments, over half your paycheque is spoken for.

Keeping up with your high spending friends in your 30s and 40s leads you to financing a new Audi, or heaven forbid, leasing a BMW. Monthly auto fees can climb over $500 a month.

If you can’t pay cash for it, you can’t afford it. Live by this mantra, stay out of debt and free your best wealth-building tool – your income.

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