Money Brain: Here’s a way for you to get a better handle on debt

Imagine you want to buy a furniture set and a vacation. Which one would you be more willing to go into debt for? If you’re like most people, you probably think you’re more likely to borrow for the set of furniture. It’s practical, long-lasting, and “worth” using debt. But it turns out that this perspective only explains borrowing in a small minority of situations.

The one important factor that fundamentally shapes people’s decisions to borrow is the borrowing context. People tend to consider using borrowed funds in two contexts and depending on which context they’re in, people’s attitudes about what purchases they’re willing to borrow for drastically change.

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