Student-Debt Advice for College Graduates

The Only Three Purchases That Are Worthy of Debt

GUS SAUTER : Perhaps the most important part of the repayment plan is to realize that “debt” is a four-letter word, which the recent grad is undoubtedly grasping quickly. So it’s important to chip away at the current debt without piling more on.

The most critical factor to achieving long-term financial success is to never ever finance current consumption with debt. Never go to a restaurant or purchase a pair of shoes and pay with a credit card for which you will roll the debt forward. Note that it is fine to use a credit card as a convenience, as long as you intend to pay it off at the end of the month.

While the use of debt must be minimized, I believe there are two significant purchases in addition to education that can appropriately be financed by debt. The first is housing and the second is transportation. Like education, these are long-term investments, as opposed to short-term consumption, such as a shopping spree. The reality is that most people will have to manage a combination of these three types of debt for the first 20 to 30 years of their working career.