A question I hear frequently is that of when is it appropriate to borrow money. People want to know what purchases qualify for borrowing money, and what purchases they should pay for in cash. While this is a tricky situation, I have a simple rule of thumb. Borrow money for purchases that give benefits for a long period of time, but have to be paid for immediately. That's it.

A college education pays benefits in the form of increased employment opportunities over your entire life. A house can be used for shelter for your entire life. A stereo, however, will NOT provide long term benefits to you. Any form of entertainment will NOT provide long term benefits to you. Do not go into debt for these things.

I will end this with a caveat: every situation is different, and may require a different solution. You may wish to get advise from a financial advisor before you make decisions concerning debt.

Also, this is simply a rule of thumb that works for me. I do not guarantee that it will work for you, and I assume no responsibility for what happens if you follow my advice.