When Is It Worth Going Into Debt?

going into debt

People’s attitude about debt varies a lot from person to person. Some people think that it’s a bad idea because it means that your expenses are exceeding your income. But other people believe that it’s a good idea, as it allows you to increase your spending power beyond that which you would have been able to without the money.

Whether debt is good or bad really depends on how you use it. The original purpose of going into debt was to finance a new project that would yield significant returns in the future. Entrepreneurs used to go into debt to build things like railroads so that they could charge freight companies for using their tracks once they were built, paying back the lender and making themselves rich in the process.

The natural question that arises, therefore, is: when is it worth going into debt? Let’s take a look.

College Degree

The returns on college degrees have been falling over the last twenty years or so. There are a variety of reasons for this, including the fact that there are just more college-educated people around these days, pushing down wage rates. But it turns out that going to college is still worth the investment, so long as you choose the right course. Returns are highest for things like law and medicine, as well as sciences and finance. Returns are lowest for things like archaeology and liberal arts degrees.

Home Improvements

Another reason many people go into debt is to make home improvements. Home improvements are worth going into debt because, like a college education, they have a big payoff in the future. Sorting things out like mould in your wall or a rotting roof can make a big difference to the resale price of your home. If you’re a homeowner, you can get personal loans for poor credit to pay for it all. Many of these loans offer competitive rates to people who already own their own homes.


Travel is one of those things where it definitely isn’t worth going into debt to do. Why? Because travel by itself doesn’t offer any returns. Once you’ve been on holiday, the resources have been consumed, and you’ve got nothing to show for it. Memories might last a lifetime, but so does bad debt.

Buying A Car

Buying a car is a little tricky. Cars don’t go up in value, like houses, over time, so at first, glance investing in one might not seem like a good idea. But then you have to weigh up the costs of not owning a car. For instance, not owning a car could mean that you can’t take higher paying jobs that would require you to drive out of town.

A good rule of thumb is this: don’t go into debt if all you need a car for is leisure. Go into debt if you need a car for things that will help you earn money in the future, like commuting to a better-paid job.

Just remember that new cars lose about 40 percent of their value in the first three to five years, so getting one second hand is more cost-effective.

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