Most Common Debt On Our Balance Sheet

Almost everyone carries some form of debt. Here is a run down of the most common debt.

1. Student Loan Debt – Well, unless your parents fully saved for your college education, you will be stiffed with this one. My friends who are doctors and lawyers have an even higher debt load from their law school and med school. Even if your parents funded your college tuition, it is highly unlikely that they fund post grad studies. And these loans are huge!

2. Credit Card Debt – Surprise surprise….but credit card debt is so common these days it is simply unreal. In fact, news reports has it that people would rather pay off their credit card debt than their house these days! Of all my friends who carry credit card debt, most have about debt on 5 cards. Yes, 5 cards. Guess if you have credit card debt, then chances are that you have balances on more than one card.

3. Home Equity Line of Credit – Many people I speak to have a hone equity line of credit these days. Most was used for home renovations – which to many people seems like a good investment.

4. Mortgage – Don’t we all have one? Wish it would go away. But we were always brainwashed that your home was an “investment”! To me it feels like a recurring expense! Traditionally, one’s home mortgage was a 30 year fixed rate mortgage where your monthly payment is fixed. These days, they are so many variety that many have fell for low teaser rates that increase dramatically at the reset dates!

5. Auto Loans – Well, some of us have auto loans, and some of us lease. For me, I’d rather pay cash on a car (a second hand car). Cars are depreciating assets (with the exception of vintage cars), so taking debt on a depreciating asset simply does not make sense to me). Those who change their cars often tend to lease. To me, having no monthly payments is the best thing.

6. Securities Margin Debt – I know some friends who have security margin accounts and use them to pay their taxes! They figured that they would rather have their money working harder for them rather than paying it to Uncle Sam.

7. Insurance Payments – Huh! Are these really debt. To me, they are on-going expenses and hence still feels debt to me. One way to get around this is to have permenent insurance and have one such that you can pay up in X number of years.