Is there any merit to cultivating debt in our society? It is often said that debt might enhance your consumption standard today but will compromise future consumption. 

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There is no question that there is a great deal of truth to that statement, for certain kinds of debt in particular.  Historically, this has not been true for the kinds of debts you use as examples, though.  That picture is changing now, so while there can still be merit to incurring these kinds of debt, I think more caution is needed when making that decision.  Let's look at different kinds of debt. 

If you want the latest television and do not have cash in hand to pay for it, purchasing it on credit means you are harming your present and future consumption.  By the time you get done paying for the television, you could probably have purchased it two times over, at the very least. This means that there is no merit to having decided to incur this debt.  When you paying at least twice as much as you need to, you are tying up your money for no purpose but to satisfy your own impatience to have a consumer good. 

However, when we incur mortgage or student loan debt, we have traditionally done so as an investment, betting what used to be a fairly sure thing on the value of the property exceeding what we are paying for it and on the value of an education doing so as well.  We are getting into debt based upon the premise that we will be able to rely upon this increase in value to increase future consumption.  A paid off house has financed retirements, second homes, travel, illnesses, and college educations, in addition to having provided shelter, stability, and significant tax advantages along the way.  A college degree has historically provided for substantially higher earnings than a high school diploma, which allows the graduate plenty of consumption in the future. 

In today's world, in which the housing bubble in the United States has burst and in which college tuition has become astronomically high, more thought and care must go into a decision whether or not to incur this kind of debt, not only for the purposes of the possibility of future consumption, but also for the purpose of taking care not to own a house the value of which becomes less than the debt and actually be losing money or taking care not to incur student loans that exceed one's ability to pay them while trying to live even modestly.  If it takes you ten years to clear your student debt and in the meantime you have a job that you didn't even need a degree for and cannot afford a house or a car, this has no merit, certainly.  Choose wisely, for example, a more modest home in a growing community or two years at a community college followed by two years at a state university.  Both can still be wonderful investments for one's future. 

Depending on one's choice in home or college, it can still be true that there is merit in incurring debt for either, but incurring debt for consumer goods such as televisions is always the path to limiting oneself financially later on. 


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