Many a times when you sit down to write out a check, the list of payments may seem unending. There are car payments, rent or mortgage payments, credit card payments, and insurance payments. As you can see most of these are just repayments of debts and loans. On the other hand, you may feel that there is no way out and that if you would like to maintain the kind of lifestyle that you want, the only way to do so is on borrowed money.
This need not be true. To be fair, living within our means will mean some hard decisions and some compromises on how you want to live your life. However, most of the time by just managing your money a little more wisely and saving for purchases rather then just using credit will let you live the life you want to. And with more dignity.
We should add though that not all forms of debt are bad. It may be a good idea to take a loan or mortgage to buy a home. The value of property keeps increasing, the interest that you pay on your home loan is tax deductible and you could treat the money paid for the home as equity. You can use this to get a second mortgage if you so desire. Similarly, student debts can serve a great purpose. You get to follow the kind of education you want with the help of a student loan and then when you are well-settled in a high-paying job, you can afford to pay it off, interest and all.
The worst type of debt is what is labeled as consumer debt. This is when consumers use their credit cards to purchase many small items that do not increase in value and worse still items that they do not need and would not have purchased if not for the presence of a credit card. There is no tax benefit provided on the interest paid for consumer loans and in fact, interest rates for consumer loans are amongst the steepest. While using credit cards to buy a car when there is not enough cash to make a down payment is understandable, purchasing things without knowing exactly where the money for repayment is coming from is one of the biggest mistakes consumers make.
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This need not be true. To be fair, living within our means will mean some hard decisions and some compromises on how you want to live your life. However, most of the time by just managing your money a little more wisely and saving for purchases rather then just using credit will let you live the life you want to. And with more dignity.
We should add though that not all forms of debt are bad. It may be a good idea to take a loan or mortgage to buy a home. The value of property keeps increasing, the interest that you pay on your home loan is tax deductible and you could treat the money paid for the home as equity. You can use this to get a second mortgage if you so desire. Similarly, student debts can serve a great purpose. You get to follow the kind of education you want with the help of a student loan and then when you are well-settled in a high-paying job, you can afford to pay it off, interest and all.
The worst type of debt is what is labeled as consumer debt. This is when consumers use their credit cards to purchase many small items that do not increase in value and worse still items that they do not need and would not have purchased if not for the presence of a credit card. There is no tax benefit provided on the interest paid for consumer loans and in fact, interest rates for consumer loans are amongst the steepest. While using credit cards to buy a car when there is not enough cash to make a down payment is understandable, purchasing things without knowing exactly where the money for repayment is coming from is one of the biggest mistakes consumers make.
