According to the 2015 American Household Credit Card Debt Study, U.S. consumers owe a total of $712 billion in credit card debt, and $8.37 trillion in mortgages. The average American household has $132,086 in debt, with $15,310 of that on credit cards. For those carrying student loan debt, the average balance is about $49,000.

OUCH.

Like risk tolerance, debt tolerance varies greatly from one person to another, depending on one’s circumstances, upbringing, etc. Some people seem to embrace debt like an old friend, while others avoid it like a weekend visit from the in-laws.

Financial guru Suze Orman believes that there can be such a thing as “good debt” in certain circumstances: student loans for an education that will improve your earning potential and net worth in the long run; a reasonable mortgage, when it’s managed responsibly and has an end in sight.

The Minimalists, on the other hand, wholeheartedly profess that “There is no such thing as good debt!” Debt is the thing that keeps us stuck in jobs we hate, making payments for a bunch of stuff we don’t need, trying to impress people we don’t know or like. All debt is evil. Avoid it at all costs.

Unfortunately, many people do get in over their heads, taking on more debt than they can comfortably afford. Hopeful twenty-somethings graduate from college with six-figure debt, only to move back home with their parents and work at Starbucks. Young families bury themselves in decades of mortgage debt in order to buy the McMansions of their dreams, furnish them with credit cards, and lease luxury SUVs to impress their equally indebted neighbors, without really looking at the big picture or questioning whether or not it makes sense for them.

While mindless consumerism likely accounts for some portion of this mountain of consumer debt, according to NerdWallet, other economic factors are also at play:

Household income has grown by 26% in the past 12 years, but the cost of living has gone up 29% in that time period. And some of the largest expenses for consumers — like medical care, food and housing — have significantly outpaced income growth.

When cost of living outpaces income growth, debt increases.

It would be easy to say consumers are spending irresponsibly, leaving the recession (and their budgets) in the dust. But it’s not quite that simple.

Personally, I don’t think any type of debt should ever be considered “good.” But I will acknowledge that, in certain situations, when entered into mindfully, with a clear means of repayment and an end in sight, some debt can be used as a tool to improve our lives and help us meet our long-term financial goals.

A small mortgage, for example, can make sense if the monthly payment, including taxes and insurance, is equal to or less than you’d expect to pay for rent. If you’re blindsided by an unanticipated financial emergency without adequate savings, a credit card can be a lifesaver. A small car payment can provide the means to obtain a reliable vehicle to get you to work every day.

What do you think? How do you feel about debt? Is it an important financial tool, the root of all evil, or somewhere in-between?

~PEACE~