Debt vs. Ego
In financial planning, there's good debt and bad debt. Good debt is a debt that has tax deductible interest, while bad debt is something that does not have tax deductible interest. Leveraging for investment can be a very powerful wealth generating strategy, however it isn't for the faint of heart. With that being said, student loans distributed from the government are a tax-deductible debt, so is this a good debt? You've essentially invested in yourself and your future. While I 100% support continuing education to set yourself up for an ideal career, I do struggle with the after math of student loan repayments and how it can cripple your future when you're ready to start adulting.
What I mean is picture this; you're 26yrs old and in an entry level position in your career, you're all set for an amazing career trajectory but it takes time on the job to get there. On the flip side you're ready to buy a house, get married, and all of those stereotypical things we do in our late 20's.
Here are some of the massive drains on your finances:
Student loan repayment or paying for further education
Saving for a down payment
Saving for closing costs on a home
Don't forget that home will need furnishing and fixtures
Maybe you'll need to buy a car
Paying for a wedding
Maybe you will be on parental leave here and there, on reduced income
And don't forget the most important thing: you want to live your life!
Our society is front-end loading all of these massive financial commitments in a very short period of time, AND during your lowest income earning years. When I speak about this conundrum, it's because I've lived this very real scenario and became a financial sinking ship. I was reading an article about how Canadian millennials are the highest demographic that are filing for insolvency, when I think about this it makes me wonder if all of the above has caught to them? Although I'm not a millennial, I had visited the idea of insolvency as my only way out. OK, now here's the hard part to hear, do you know what it took for me crawl my way out of financial mayhem? I had to put my ego aside. Yup, that was it, it is that simple. While this concept seems so simple, it was the hardest thing I ever did. Now, what that means for you is very different than what it means to me. In financial planning, it isn't about the black or white, it's about finding the gray that works for you, and sometimes that gray area isn't so pretty. But it is 100% temporary; it is not forever and it does not define you.