Debt in the Household Covenant Week 2

Over Lent this year I am assessing our household finances against the topics in the 'Household Covenant'. For week 2 of Lent, the topic is debt.

The Covenant poses the questions - How is debt affecting you? How does debt affect other people? (my paraphrase).

Debt does not affect us overly much. I've been running a small business for a number of years (Mintleaf Studio - professional website design and development in Melbourne) and had made sure I was relatively debt free as part of the overall financial risk. Not everyone in small business does that, I'm sure that many households are greatly in debt to finance a small business that isn't actually very viable.

So, we did it differently. We have no mortgage, a small credit card limit that we pay off most months and a HELP debt (that's a debt to the Commonwealth as they paid for my engineering undergraduate and post-graduate study).

This means we can tighten our belts very effectively and live on less than many of our peers. We can be a little more generous with time and money as we don't have to service debt.

Of course, we may have forgone some wealth-generating investing in order to stay so low in debt; which may not be the best place to be long-term.

We don't know enough about the effects of debt in the world, except that Highly Indebted Poor Countries often face debt that can never be repaid. We've been involved in the Jubilee, Drop the Debt and Make Poverty History campaigns for a while and that helped us understand that kind of debt.

We should find out a bit more about how debt affects relatively affluent westerners, as well as how debt can be sustainable in poorer regions of the world. At the moment I couldn't tell you much about the difference between bad and good debts - and I think I ought to know.