We were taught by parents, friends in even in church to stay away from debt. Poor debt managent may lead to bankruptcy. That is why people are afraid to get a personal loan or a credit card. Debt is not necessarily bad. It is how people’s poor debt management make it a bad thing. So why should people not be afraid of debt?
A lot of people start of applying for credit cards when they are starting out. They get excited when their credit card application gets approved. It a status symbol for some. There is a false pretense that a bigger credit limit means that they are well off. This is not a bad thing unless you purchase everything you want and not consider if you could actually for your purchase.
A lot of people also have a habit of thinking that a credit card is an extension of their wallet. Swipe here, swipe there and swipe everywhere. That is not a case. People don’t feel bad when they use their credit card for a purchase instead of actually taking out money from your wallet. They have this misconception that the credit limit is a bottomless pit for your enjoyment. If you have a credit limit of 20k and you want to purchase an item with the same amount, it wouldn’t hurt to charge it to your credit card. But if you have only 20k in you are going to purchase the same item, you would have to think twice. See my point?
Now when is it ok to use credit card for your purchases? If you could purchase the item in a installment basis and have the means to pay the monthly dues then you are goog to go. Again what is important thing to remember is that you have the means to pay it in the long run.
Second if that item is a need instead of a want then go ahead and put it on credit. You have to identify whether the purchase that you will be making is a need or a want. If it something that you can delay for a future date that is a want. But if it something that you need to survive, then it is a need.
I need clothes right so it need? Yes it is. Generally speaking. But if you are going to purchase a pants that cost more than you can afford then it is a want. Instead of purchasing a thousand dollar sneakers, settle for something more affordable.
Here is another reason why you shouldn’t be afraid of debt. As we all now purchasing a house is expensive. But if you are renting a place, it is not a bad thing to consider purchasing a new house. Why? Instead of paying for rent, the amount that you will be shelling out on a monthly basis would go to your mortgage. You might be thinking that the mortgage with cost more than your rent. Mostly like it will be. So you have to sacrifice a little to be able to pay your motgage. Let’s say your going to the gym. You might consider stopping your gym subscription and allot that money to your mortgage. Same thing would go to your daily overpriced coffee or anything that you could live without. You need to sacrifice a bit to allocate your other expenses to the mortgage.
Another thing you might consider is making another source of income. The more sources of income the better. There are so many ways to make extra money nowadays. You don’t even have to leave the house to earn a little extra.
This is not only limited to buying a house. It is either for a new car, your child’s college education or any needs that you can’t afford to shell out a big chunk of money. Again keyword here is need. If you are going get a personal loan or purchasing using a credit card to buy an Iphone X, then that is not a good financial decision.
Using debt to your advantage could help you achieve your dreams. You just have to be manage it properly so that you would not fall into debt. Improper usage of the money gain from debt could mess up your personal finance even through retirement. So thread carefully and manage your finances properly.
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