by Kandance Keller
The great debate over debt can be a touchy subject for even the most budget-conscious consumer. In general, debt is something that has to be managed for most people. Leveraging good debt versus bad debt can provide several incentives over time and slowly increase emergency funds for circumstances beyond control.
Homeownership is the goal of many people looking to achieve a higher level of financial independence. Most people cannot purchase a home with cash outright and the fact remains that there are several financial incentives with having a mortgage.
• Tax deduction
The interest paid on a mortgage can be tax-deductible. This can reduce the tax burden for those who are self-employed or have a higher income.
• Leveraging retirement savings
Keeping payments and interest rates low can effectively increase the return of investment from a mortgage. The rate of return of many investments are often higher than the interest rate of a fixed mortgage. The remaining savings each month can be applied to a retirement fund.
Education & Career Advancement
Completing a training program or degree can have immediate effects on income and job stability. To reach this goal many will use student loans to see this goal through. Carefully managing student debt will reduce the stress of paying for school completely out of pocket and allow you to finish your degree or training sooner. A solid certification or degree can contribute to more career opportunities down the road that can easily pay off the student debt.
Start a Business
A business loan can add leverage for getting the business plan off the ground and running. Hard work and drive are not always enough to get a business going forward. Having a smart amount of working capital is often necessary to act as a buffer to have a solid business foundation.
Financing a Car
Ideally, buying a used vehicle with cash is the smartest option for the long-term. Owning a reliable vehicle is important and financing a vehicle can often provide additional security. Some jobs may require extensive travel and owning a newer vehicle can reduce the amount of repairs. Many car loans have reduced interest rates for good credit. A car loan is an installment loan and has a long-lasting effect on building positive credit. Overland park car dealerships or any local dealership can help you get into a reliable vehicle without going too far into debt.
Borrowing a loan to increase the energy efficiency of a home can lower utility bills and possibly allow for a tax break. Alternative appliances such as a hybrid hot water heater or geothermal system for heating can be expensive at first. Over time the homeowner can save money and pay back the loan with a benefit.
Although it is important to do your best to live within your means and avoid debt, there are still certain investments worth going into debt for.
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