What is our goal and is debt unavoidable?

Reader says...
I am one of those silent readers following your blog and i greatly appreciate your thoughts and wisdom regarding a multitude of issues.

I am currently facing a dilemma of whether to pursue a post graduate education and i was wondering you could knock some sense into me :)




I am a 29yo engineering graduate who developed an interest in finance and was fortunate enough to make an internal switch to a business and financial analyst role within my company.

I was able to pick up the job requirements for my current role but i feel the need to gain more knowledge on the finance side of things and hence i am considering taking up a part time masters in finance.





I would think that this is a form of good debt by investing in myself and having this paper qualification could possibly open up more opportunities in the future but at the same time, this will put me $40k in debt and part of me thinks that this money could be put to use by income investing.

Could you kindly advice what your younger self would have done in this case?

Thank you for hearing me rant.





AK says...
It is very simple. ;)

Ask if this is a need or a want? 

If you need this, go do it even if it puts you in debt.

Having said this, ask if there is another way to get what you want without going into massive debt?

I decided that I needed some knowledge of business when I left teaching to go into sales. 

So, I did a part time diploma in business for about 2 years. (See related post at the end of this blog.)

I didn't have to go into debt to do it.

It probably cost me less than two thousand dollars to do the whole course back in those days.




I decided what I needed was knowledge and learning in a structured manner to speed up the process. 

I didn't need a prestigious degree for my purpose.

So, ask yourself what are you trying to achieve and if debt is unavoidable?
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Although I try to avoid debt in life, it is not because debt is an absolutely bad thing.

Used judiciously, debt can be a good thing if it helps us to generate more income.

Always remember that even with good debt, it is important not to over-leverage because things do go horribly wrong like they sometimes do.





When do we know we are over-leveraged?

There is no precise measure of over-leverage but if we are unable to service our debt for even a short period of time (i.e. 6 months to 24 months) if we should lose our jobs, I would consider us to be over-leveraged.

Of course, this will bring us to another favorite topic of mine which is the importance of having an adequate emergency fund. (See related post #2.)






Related posts:
1. What should I study to be a good investor?
2. How much should we have in emergency funds?