The question of whether or not to borrow money to make a purchase to a simple formula: borrow money to buy things that go up in value.

It’s no secret that Americans have a lot of consumer debt – that’s why so many of us are underwater on our mortgages and why record numbers have filed for personal bankruptcy in the last few years. Why? According to this article on consumer debt, these factors play a role:

• We go into debt for the wrong reasons. Taking on debt to buy a car or television is dangerous because these items begin losing value immediately. You have little to no chance of selling in the future them for more than you buy them.
• We’ve accepted the normalcy of debt. Before the Great Recession hit in 2007, our national savings rate was less than zero percent—that means we were collectively spending money we did not have. Nobody thought this was a big deal because so many of us were doing it. But when the economy slowed down, lots of us found ourselves in trouble.
• We don’t realize the cost of debt. Resisting consumer debt often means forgoing pleasure in the present (e.g. not splurging on a fancy dinner or the latest cell phone model we can’t afford) for peace of mind in the future (not having debt limit our lifestyles). If the price tag on items you bought with a credit card included the total of all the interest you’d eventually pay on it, your purchasing decisions might be very different.

Recovering from Debt

So what can you do if you’re currently strapped with more debt than you’d like? Luckily, you have a few options.

• Change your habits: Learning to tame your debt requires a combination of commitment, budgeting, lifestyle changes and a financial game plan. If you’re truly ready to eliminate your financial burdens, though, this method may work for you.
• Negotiate with your creditors: Again, you’ll have to commit to repaying your debts. But once you do, it’s often a good idea to contact all of your creditors and ask for lower interest rates or a reduction in the total dollar amount of your obligation. Many consumers are surprised to learn that creditors are often willing to work with them.
• File for bankruptcy: If your debts are beyond your current ability to repay them, protection from the bankruptcy court may be a good option. Depending on the type of personal bankruptcy you file, you may be able to walk away from your debts, or create a court-protected repayment plan.