That’s right, some debt can actually be good for you. Before you go grab the latest pre-approved credit card offer from your trash can or run down to your bank to get a loan, read on.

There are some things that provide enough value back to us that racking up debt to get them makes good financial sense. Our homes, a car to get to and from work and a college education are some examples of things the most people would never be able to buy with cash.

A home provides us with shelter, a sense of security and even increases in value by historical standards. Home loans are typically at a low interest rate and mortgage interest is tax deductible for most people. Using debt to purchase a home is usually a pretty good investment. This isn’t always true and you should read the other side of the coin at Genxfinance.

A car is almost necessary in some areas to get to and from work. Not having one can limit our job prospects and make it difficult to do the simplest tasks, such as grocery shopping. If you don’t have easy access to public transportation then financing a car can make good financial sense too. It is one debt that you should try to pay off as quickly as possible though as the return on your investment for a car is usually negative.

A college education will pay you back for the rest of your life and could be argued to be the best investment of the three. College graduates with a Bachelors degree will make $900,000 more than those with a high school diploma on average during their lifetime. Those with a Masters degree are likely to make $1.3 million more than their peers with only a high school diploma. Pretty heady stuff that. Combine that with low interest rates, payment deferral and tax breaks on student loan interest and I think you’ll agree that using credit to get a college education is a pretty financially savvy move.

That being said, we still need to make wise choices when we start to take on even good debt. Going beyond your means is not a smart idea. What I mean is that there is no need to buy a $250,000 house when you’re only making $40,000 a year. In the same vein, a $20,000 car will get you to work just as well as a $40,000 car. And an Ivy League education is not necessary to increase your income, in most cases your State school will be the best value for your money.

In almost every case you can determine how “good” a debt will be for you by looking at how it will enhance your lifestyle on a permanent basis or at least in the long term. So, a new pair of shoes might make you feel great today and maybe even for the next couple weeks, but they provide no long term improvement in your lifestyle. Paying a 12-24% premium for them (in the form of credit card interest) is a poor financial choice. The same applies to a pepperoni pizza, new clothes, a night out partying with your friends…I think you get the picture.

Taking on good debt and avoiding bad debt is all part of managing your money. When you are able to control the things that are adding to your debt you are in control of your money and will find that there’s a big difference in the quality of your life when you are in control.

• Maybe it’s the fault of our government who continues to propagate the idea that they will take care of us, that we are entitled to a certain standard of living and who continues to spend more than they make by a wider margin every year.
• Or perhaps we can blame the media companies who put all the latest gadgets, toys and shiny playthings in front of us continually with the message that if we don’t have these things we are missing out and somehow less successful than our peers.
• Or we can blame the entertainment industry; who tell us that everyone should be living a dream and push us to buy all the trappings of that dream life.
• Maybe it’s our neighbors fault because they keep buying new things for their houses, new cars and electronics and if they have a landscaping service don’t we need one too…

In all honesty we have no one to blame but ourselves if we are living beyond our means. We have control of our financial destiny and no one else is going to care if we are broke when we should be retired and enjoying our golden years. Take responsibility for your finances and block out all the noise from outside. Look inside yourself and take stock of what you really need to make you happy. Chances are it’s not a new iPod or a new BMW or new furniture. It certainly isn’t mountains of debt that only make the banks and credit card companies richer. Chances are many of the things that will make you truly happy require very little money.

It may seem painful initially and many of us shy away from taking a close look at our finances for fear of what we’ll find, but you need to start out by creating a budget to find out how you SHOULD be spending your money. Once that’s done track your spending for a month or two to see if that is really how you ARE spending your money. Chances are there are a lot of little things you buy that aren’t in your budget. These could add up to hundreds of dollars a month (I know in my case they did). By simply becoming aware of where your money goes you might be able to get to the point that you’re spending less than you make.

One thing I can guarantee is that if you’re living on less than you make you’ll have less stress in your life. Small emergency expenses won’t create a huge problem for you because you’ll have the money to cope with them. You won’t be dwelling on where you’re going to get the money to pay this bill or that bill each month. You’ll know that you’re building a solid foundation for your future and I can tell you it will give you both a feeling of relief and satisfaction.

Another thing you’ll find once you’re living on less than you make is increased freedom. When you’re trapped in the debt spiral or living paycheck to paycheck you often have few choices in where your money gets spent or how much of your time you need to trade for the money that you need. Once you’ve gotten to the point that you spend less than you make all sorts of choices become available. The choice to quit your second job or turn down overtime and spend more time with your family is priceless. The choice to get away for the weekend with your spouse or take your family on a week long vacation WITHOUT increasing your debt is wonderful. The choice to follow your dreams, whatever they may be, often only opens up once you have the freedom from living paycheck to paycheck.

If you’re still spending more than you make then I highly recommend you take a look at your finances and make a plan TODAY to get that under control and spend less than you make. It may be a struggle initially, you may feel overwhelmed or like you’ll never be able to make it work, but if you don’t make it work now you’ll end up in a much worse place. Plus I can guarantee that once you get your spending in line with your income you’ll feel more relaxed and more happy overall.

Case in point. My wife bought me several magazine subscriptions for Christmas, one of which was Barron’s. She purchased the subscriptions through Magazine.com which is a broker to purchase magazines. One small point that she missed when she made the purchase is that for some magazines the company will automatically bill you when the subscription is about to expire. Great if you’re expecting it and have planned for the charge. Bad if you’re not expecting it or in fact have no idea that it is going to happen. In my poor wife’s defense I will mention that she is not American and is not accustomed to these types of practices from her home country, so it’s not surprising that she got burned by this. She simply had no idea that this type of thing was done.

So, after logging into our checking accounts this morning I see an overdraft protection fee in my checking coming from her account. Switch over to her account and yes it is overdrawn, thanks to a $59 charge for Barron’s. Well at least I had the foresight to link the accounts so my balance covered the overdraft.

I immediately jump on IM and ask my wife if she authorized the payment, she tells me no, she has no idea where the charge came from. Well, I have a pretty good idea that it was an auto bill payment from Magazine.com so I ask her to send me a copy of the initial order confirmation. Sure enough, when I read the details I find that Barron’s is included as one of their “Preferred” subscriptions, which means they do rebills on it. Of course they sell this as a convenience to you, the consumer, because you’ll never have to be bothered with bills coming from the subscription company and never have to worry about missed issues. Bullshit! I want to know when I’m being charged for something and if I miss an issue I can always pick it up at the news stand…but I digress.

The thing is, the agreement states that they will “never charge your credit/debit card without notifying you first!” and that you will receive an email notifying you that your subscription is going to end, how much it will cost to renew, the number of subscriptions, your shipping address and what card they are going to charge. Surprisingly, my wife never received any email from them.

I called them to explain that they billed us and we never received the email. I have to say that they were very polite professional and offered to refund the charge. I also asked them to cancel any auto billing on other magazines which they promptly agreed to. While they were very quick to correct the problem I still feel that the practice of setting up the rebills in the first place is wrong. I am glad though that Magazine.com was quick to correct the error.

Lessons learned:
1. Never set up automatic recurring billing for non-necessary items
2. If you do set up auto billing make sure you know when it is going to happen and that you have the funds to cover it
3. Check your bank account daily for any irregularities
4. Don’t let your checking account balance fall too low. Having a cushion of even $100 can save you loads of grief and fees.

Here are more words of wisdom regarding the subject of Auto billing:
Why I Don’t Do Auto Billing
Why I’m Skittish Around Automatic Billing

And an alternative to auto bill payments (which I am investigating for myself)
The Evils of Auto Billpay