3 Indicators That You Can Take On Debt

Matt McDonough
3 min readNov 18, 2022

Over 75% of Americans carry some form of debt and that debt averages just over $96,000 per household.

This means that debt is or likely will enter the realm of your personal finances.

Maitree Rimthong via Pexels

Do Not Be Afraid Of Debt

At least on the surface.

Debt is not inherently good or bad. It is an advance for money that you currently do not have, at a price. That price is interest while you repay the lender.

What you need to be afraid of is the reason you are taking on debt. Luckily for you, there are three indicators that you are able to take on debt:

1. You have a safety net,

2. What type of debt are you taking on?

3. Do the math.

1. You Have A Safety Net

Once you commit to debt, there are only two ways out: (1) pay it off or (2) declare bankruptcy.

No one wants the second option, so you always need a backup in case of an emergency. Building a safety net is the simplest method to protect yourself in case of a financial emergency.

2. What Type Of Debt Are You Taking On?

An average of $96,000 in debt per household, why are people taking on this debt?

· The largest source of debt relates to a mortgage or home equity line of credit (“HELOC”)

Taking on debt to own a home is not a problem, in fact, it is potentially the most rewarding financial commitment you will ever make.

However, overextending yourself to own a home you cannot afford will crush your personal finances.

· The second largest source of debt relates to auto loans

Buying a car to get you from point A to B is worthwhile. Just make sure you can afford to pay off the car.

A luxury sports car is not worth any soul-crushing levels of debt required to finance it.

· The third largest source of debt comes relates to credit cards

Credit card debt carries incredibly high-interest rates. This debt should be avoided at all costs … but there are still valid reasons to…

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Matt McDonough

Hello! I am a CPA by day, writer by night, and adventurer on the weekends. I’m on the lookout for fun ideas to read, please send anything interesting my way!