NEW YORK (MainStreet) — The average American household with debt has over $15,000 in credit card debt as of June 2015. The total shared debt of all Americans is over $11 trillion, up 1.7% from last year. With so much debt, it's important to be cautious about adding new debt to your share of the load. And there are definitely some times when it's just never a good idea to take on more debt. So when you should you absolutely, positively, never borrow money?
When You Can't Pay It Back
Don't borrow money you can't pay back. Sounds obvious, right? But Mike Sullivan, director of education with Take Charge America, points out that it's not as obvious as you might think. "If you're already cash poor and can't make your payments, borrowing more money could be a disaster," he says. He advises people not to borrow money unless they can put together a budget that shows how they're going to pay it back. "If you can't do that, you're walking into a financial disaster," he says.
To Maintain a Lifestyle
"Borrowing to maintain a lifestyle is the most inappropriate reason of all," says Sullivan. He says that lots of people come in who have borrowed a lot of money. When he asks why, they often answer that it was the only way they could get by. That's the very definition of borrowing money to maintain a lifestyle. More than just credit card debt, Sullivan suggests that this is a great way to get caught in the cycle of payday loans and other high interest loan products. You really can't afford the lifestyle you're living and you're using credit and other forms of debt to inflate your income artificially.