The problem with personal finances becomes clear when people start borrowing money just to borrow even more. Take using a credit card for a car downpayment, for example. Car dealers might let you put down $3,000 on plastic, but if you can’t afford to pay off your credit card every month, that’s a red flag. It’s like buying a car without the cash or even 10% down from your own savings.
I get the allure of a nice car—I’ve owned seven myself in as many years. But it’s not smart to charge a downpayment if you can’t cover the whole car price from your savings upfront. That’s just not responsible.
Then there’s borrowing from your folks for real estate. Some college grads get help from mom and dad for a housing downpayment. That’s okay if you’re paying them back with interest. But in pricey cities like San Francisco or New York, parents’ bank accounts often make the difference in affording million-dollar homes. The question is, do these kids ever pay their parents back?
And what about borrowing for experiences? Taking out loans for things that lose value is a bad idea. Like putting $2,000 on a credit card for a cruise—it might seem fine at first, but with a 10% interest rate, it adds up fast. Good memories might last, but they don’t pay off debt.
The bottom line: if you can’t afford the downpayment on your own, don’t borrow money to borrow more money. Whether it’s stuff or experiences, if you can’t pay upfront, it’s best to skip it.
