I’ll admit it, spending is fun. Whether it be on some new gadget or eating at the newest restaurant, parting with your hard earned cash can be quite rewarding. How you manage your day-to-day expenses is up to you, but there are a few things you should never go into debt for.
You might convince yourself that going into debt for some items is worth it, but we’re not talking about a mortgage or student loans here. What we’re focusing on are the things that you may think you deserve or want, and you’re just not willing to wait until you have enough saved for them.
You won’t believe how many times I’ve heard people convince themselves that a vacation is a must even though they don’t have the funds to pay it off when they return home. Do any of these excuses sound familiar?
“My wife and I haven’t had some time alone together in a while so we need this break”
“I’ve been really stressed out at a work and a vacation is exactly what I need to get my mind back on track”
“I got an awesome deal on the flight so I couldn’t say no”
I certainly understand that you want to spend alone time with your loved ones or that you may be stressed out about work and need a break. Heck, I love a good flight deal myself, but if you don’t have the money to pay for your trip, how does any of this help? Yes, you’ll have some amazing memories, but you’ll also have debt and potentially more stress.
Did you hear the story about the girl who accumulated $10,000 USD in debt because she wanted to be an Instagram star? It sounds ridiculous, but it actually happened. Lissette Calveiro, a 26-year-old from New York went broke while trying to keep up appearances on social media.
The cost of new clothes, fancy vacations, and eating at the trendiest restaurants made her broke, but at least she had some cool photos on Instagram right?
It’s ridiculous to think that people are spending money to try and become celebrities, but let’s be realistic, in the world of reality TV and social media, everyone would love to get in on the action. The problem is, most people don’t make it.
Okay, you would think that going into debt for emergencies would be worth it, but there are a few things to consider. What kind of an emergency are we talking about here? Are we talking about your computer that’s slowing down or replacing your car battery? If it’s the latter, this qualifies as a legit emergency, but shouldn’t you be using your emergency fund instead of going into debt?
Some people prefer to use their line of credit or credit cards as their emergency fund, but this makes no sense. You’re essentially going into debt to get out of your emergency which creates a separate problem since you’ll need to repay that money. Park your emergency fund in a high interest savings account or tax-free savings account and only draw from it in a real emergency.
I know weddings are expensive, but that’s no reason to go into debt for it. You might be able to justify it by saying that the cash gifts you receive from guests will cover most of your costs, but that’s still not a good reason to go into debt for your big day. There’s no guarantee that your costs will be covered by your guests, and do you really want to start the next stage of your life in debt?
If you don’t have the funds available, then you’re going to have to scale back on expectations. That big wedding may no longer be an option, nor will that honeymoon in the Maldives you’ve always dreamt of. Stick to what you can afford and plan accordingly.
When it comes to birthdays and holidays, gift giving can get out of hand quickly. Some kids have some crazy expensive items on their wish lists while some gift givers believe the more expensive gift you give, the more love you’ll get in return – it won’t.
Your family won’t love you less because you didn’t get them a specific gift. The kids may throw a tantrum, but they’ll still love you. There’s nothing wrong with wanting to give gifts, just make sure you set a hard budget so you don’t go into debt.
The final thought
With the exception of medical expenses, there’s not many things that are worth going into debt for no matter how you rationalize it. There’s nothing wrong with charging the majority of your purchases to your credit card as long as you’re paying the full balance every month.