3 Warnings Before Taking on Debt

sbauman7Starred Page By sbauman7, 1st Aug 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/pojemuh9/
Posted in Wikinut>Money>Debt

Simply put, debt stinks.

Unfortunately, it is a necessary evil at times. That is unless you can pay for things like a house or a car with cash outright, which most cannot. Therefore, take these 3 warnings into consideration when dealing with debt to help you manage it along the way.

1. Know your finances.

Before considering even taking on debt to acquire an asset like a car or house (or pair of really nice shoes), figure out your finances. Having a clear picture of what you have will help you assess what debt you can afford to take on. Think about a few of these questions:

What is your annual income?
How much of your budget is allocated to debt repayment?
Can you afford to take on more debt?


Again, asking these questions and being honest with yourself will help you assess if it is time to take on debt.

2. Research research research.

Not sure what the best interest rate is for a mortgage? 5% or 15%?

Research. (The lower the better.)

Compound interest monthly or yearly?

Research. (For debt, yearly. For investments, monthly!)

Adjustable or fixed rate on a mortgage?

Research. (Depends on your goals.)

You get the point. Be sure to research before you sign on the dotted line. It could cost you thousands. Literally. (Yes, one time I will actually use the word literally.)


3. Don't take on unnecessary debt.

This one sounds like a no brainer, but the easiest way to avoid debt is to use it only when necessary.

If you want a new pair of shoes from the mall, think about ways to cut in other areas if you really need them this month. Otherwise, start saving a little here and there. When you finally have enough, that purchase will be that much nicer know that you didn't have to trade your newborn down the line to pay off the debt you accrued obtaining it!

Tags

Debt, Debt Advice, Debt Free, Debt Management, Debt Problems, Debt Relief, Saving, Saving Money, Saving Tips

Meet the author

author avatar sbauman7
Full-time librarian, student, dad, and dreamer; part-time painter, writer, blogger and freedom fighter. I love to write about art, design, architecture, and current events.

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Comments

author avatar Sivaramakrishnan A
2nd Aug 2013 (#)

Incurring debt for investment in assets like a house, education, is wiser than for expenses incurred mostly in the spur of the moment. Debts can hound one leading to desperation, so better avoided - siva

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author avatar Mike Robbers
2nd Aug 2013 (#)

Agree with siva's point. In some cases it a necessary evil but still one should be careful.

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author avatar Rose*
23rd Nov 2013 (#)

One thing that helps is paying in cash for everything. You don't overspend because when you have no cash in your purse you just stop buying things.

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