Four good reasons to spend money you don't have

April was a big month for consumer debt. And I mean that in a good way.

Per the Federal Reserve, Americans borrowed in April at the highest rate in over 12 years. Nationwide, outstanding credit increased by $26.8 billion dollars in that one month alone.

From an overall economic perspective, it’s a good sign. It means people are earning more and feel confident enough to borrow. It’s a further sign of a strengthening economy.

The biggest increase came in auto and student loan debt, which rose by $18 million, with credit card debt increasing by $8.8 billion. All of which pushed consumer borrowing to an all-time high of $3.18 trillion.

So in the grand picture, all of this new debt is a good thing, even though we tend to think of debt as generally being a bad thing. But the truth about debt and credit is a little more complicated and there are always going to be perfectly good reasons to buy things on credit. Here are the four best reasons to use credit.

Credit begets credit
Not to harp on an old point, but having good credit requires that you actually use credit. You have to build a history with credit. You have to show future lenders that you’re good with borrowed money – you pay it back, as promised. So even though you may not want to use credit; even though you may not need to use credit – use credit. Use it smartly, but use it all the same. Because you never know what might come up, and being armed with a solid credit score will make things substantially easier for you.

Investing in your life
It would be awesome if we could save up our pennies and pay cash on every transaction. Some people do, and if you can manage it, bully for you. But for most of us there are going to be major life goals wrapped in steep sticker prices and in order to get where we want to go, we have to borrow. That means student loans, auto loans, mortgages, and more.

When you’re investing in your wellbeing (financial, mental, and otherwise) it’s okay to spend money you don’t have yet. Just make sure you’re not biting off more than you can chew. Never borrow without a plan and an understanding of what you can reasonably afford.

Safety and security
Credit cards are more secure than cash. You probably already knew that, but if you’ve had problems with debt and are feeling slightly anti-credit, it’s important to remember. Stolen credit cards can be replaced. Stolen cash – probably not. Fraudulent credit purchases can be corrected. Fraudulent cash purchases – probably not. Credit tends to be a safer bet for certain purchases and when traveling. The key is simply paying off your bill in full each month.

Now or later
The trickiest credit scenario is always this: to buy something now on credit or wait and buy it with cash. If we were living in a world of black and white absolutes, it’d be easy to say, “Never buy anything on credit if you can wait and buy it with cash.” We do not, however, live in such a world. The truth is that personal economics is a balancing act, but its core function is to support your daily wellbeing.

Is your mattress old and raggedy? Is it causing back pains and sleepless nights? Does it make sense to wait the 7 months it would take you to save the necessary amount of money, or to buy a new mattress now, on credit? In the end, the credit purchase would cost you more, but in the meantime you’ve got seven extra months of better sleep and better health.

You’ll have to weigh the pluses and minuses on your own, but always remember that smart money management doesn’t mean suffering and self-sacrifice. It means knowing how to make the best financial choices for your happiness today and tomorrow.

Using borrowed money is a normal, healthy part of personal economics. Using it smartly and in the right situations is the key to proper money management.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.