In some cases, borrowing money helps build wealth. Most people need a mortgage to buy a home, for instance, and student loans allow many people get an education that leads to a career.
But in other situations, going into debt does more harm than good. When you’re paying off debt — and the interest that comes with it — you’re giving someone else money that you could be saving. In other words, debt payments are money you’re not investing in your future.
Charging that new computer or handbag might seem harmless, but if you can’t really afford it, you’re running up debt — and debt restricts you financially and ultimately limits your future.
You should especially avoid going into debt to pay for these five things:
No matter how much you need a break, it isn’t worth going into debt for a vacation. Yes, you’ll return to work with enviable photos on your smartphone, but you’ll have to put in a lot of hours to pay off the trip. Even worse, making debt payments will hamper your ability to save for the unexpected. If you get laid off while you’re still making payments, you could be in a bind.
Vacations should be rewarding and rejuvenating. But going into debt for an amazing trip will just pile on the stress after your return. The memories might last, but so could the bill.
People often throw financial caution to the wind during the holidays or on special occasions. It’s easy to justify spending to create magical memories — and it can be hard to admit it when you can’t afford the gifts on your family’s wish lists.
Remember that your children won’t love you any more or less because of the awesome presents you give them. They could, however, learn about sacrifice and budgeting if you set an example. Isn’t that better than any stuffed stocking in the long run?
3. Clothes, shoes and accessories
Retail therapy is a reality for many men and women. People buy things in the hope of portraying more confident, put-together versions of themselves — and sometimes it’s tough to walk away from a good sale. There’s nothing wrong with going shopping. But when you rely on objects that you can’t afford to make yourself feel good, it becomes a problem.
Avoid charging anything on a credit card that you can’t pay off right away. Looking fabulous while being buried in debt doesn’t enhance your life. It makes it more burdensome.
No one needs the newest Apple wearable or Bose noise-canceling headphones. But you might think, “That new smartphone will keep me organized,” or “The robot vacuum will mean I have to clean less.” The fact is, you accomplished those tasks before these gadgets existed, and having the newest technology won’t change your life that much. Even worse, the next greatest thing will likely hit store shelves before you’ve paid off your new gadget.
You and your partner might have dreamed about your perfect wedding day, but you shouldn’t go into debt to pull it off. A 2014 study by researchers at Emory University in Atlanta showed that couples who spent more on their weddings had shorter marriages than those who kept costs down.
This is understandable. Starting off your marriage in debt causes stress on both partners. And couples who focus on the event rather than the relationship can lose sight of why they wanted to get married in the first place.
Spending money on material items or extravagant events won’t change your life in significant, lasting ways or make that depressed mood go away. Eventually the novelty will wear off or the event will end and you’ll want to buy or plan something new and exciting, starting the debt cycle all over again.
The next time you’re tempted to go into debt to buy something, remind yourself of that debt cycle and practice self-control instead.Learn to budget and save for those desirable items, getaways and events. It’s the only true path to financial stability and peace of mind.
This article first appeared in NerdWallet.