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DANGER OF DEBT

The disadvantages of being in debt

“The debtor is a slave to the lender.” Proverbs 22:7

Being in debt limits your options and opportunities in life! If you are in debt, you are chained to the borrower- in other words, you are your lender’s slave. Slavery as we know it was abolished a long time ago yet people are slaves in various ways and being in debt is one form which I am going to discuss here.

There are numerous disadvantages to borrowing money and being in debt and the main ones are;

1.When you use credit to make a purchase, you are spending more money on that purchase than the person who buys with their own money. In the long run, the difference between what you could have paid for stuff bought with your own money and what you actually paid for them with the interest added is quite substantial.

2.Being in debt limits your options in life! Someone with cash in the bank is able to travel to another town in search of work or has money invest or to purchase a household appliance which breaks down.

3.Being unable to meet the minimum payments required will affect your credit score or credit rating and credit card companies are likely to change the status of your card which will mean they charge you a higher interest rate in future.

4.Being stressed out over your debts can create health problems.

5.When you are in debt, you are setting a bad advantage to your children who then think that buying on credit and being in debt is normal.

The bottom line is “If you don’t have the money don’t buy it.” The crunch always comes when you have to pay the money back and for a lot of people that crunch comes with a life changing event such as a job loss, divorce, or death of a family member.

www.robertastewart.com

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CREDIT CARD DEBT

The peril’s of credit card debt

Credit is so easy to get and being in debt is so normalized that no one really blinks an eyelid if someone is up to their eyeballs in debt. In fact many of the books on finance contains a section on how to get out of debt. There is plenty of information on the internet explaining how to get out of debt but the question is, “Do you have the self-control and the determination to follow through with the advice?”

The first thing you need to do when you are in debt is seek help from a budget advisor or doing a google search on the subject.

Then you must cut up all of your credit cards and say “no more.” The next step is to figure out how you are going to repay the money. The sensible thing to do is to pay back the debt on the card with the highest interest rate and to make the minimum monthly payment on the rest. Once you have paid off one credit card pay off the next one with the highest interest rate.

Once you have paid off your debts then you can go about creating your financial portfolio-there is no point in having savings earning 5% per annum and at the same time paying say 15% interest on your debts.

The only exception to this rule is that if you are in New Zealand Kiwisaver and paid in at least $1040 per annum, you would receive $520 tax cret from the government which is the equivalent of receiving 50% per annum on an investment.

There is such a thing as good debt and bad debt! Good debt is when the value of what yoyu are borrowing the money for is increasing while bad debt is money borrowed for things which lose value over time-it is sometimes referred to as dumb debt.

An example of good debt would be to borrow money to purchase a house because the value of the house is likely to rise faster than the money borrowed against it and as more of the loan is paid back, you will have more equity in the home.

A bad debt would be borrowing for a motor vehicle because the value of the purchase declines over time and in so many cases, the money owing on the car is more than the value of the car.

An instance of stupidity is to borrow money to fund an overseas holiday because there is nothing to show for the debt.

Many people get in debt in order to purchase stuff they do not need, to impress people they do no like with money to do not have! Its all about maintaining a self image and keeping up appearances.

For sound money manager’s, the rule is “If you don’t have the money you don’t buy it.”

I have an ebook avalable called “Credit Score Magic” and you can get it here;

 

www.robertastewart.com




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ATTITUDE IS EVERYTHING

Attitude is a key quality

If there is one quality that can help you in life more than any other it is attitude; a good one will take you further than a bad one.

Read this story of two men who entered a new town;

“The first man arrived at a new town and asked the wise man at the entrance, “What are the people like in this town?”

The wise man asked the visitor, “What were the people like in the town you just came from?”

He answered, “Oh they are back-stabbers, they gossip about you, they are unfriendly, and won’t do anything for you and are hard to get along with.”

The wise man replied, “You won’t like this town either because the people here are just the same as that you described.”

The second visitor arrived at the same town as the first man and asked the wise man at the entrance, “What are the people like in this town?”

The wise man asked, “What were the people like in the town you just came from?”

The second visitor, who came from the same town as the first man, answered,”The folks in that town were really good, they looked after one another, They would bend over backwards to help even a stranger, They are a really friendly bunch of people.”

The wise man replied, “Then you will really enjoy this town because the people here are just the same as the town where you came from.”

Notice the vast differences in attitudes between the two men? In all kinds of situations attitude is important, whether it is playing sport, at work, in church, or at home. It is a fact that some people like the first man in this story are always mouthing off at something or somebody and it never occurs to them that there is a common denomonator in all of these situations. If they have a problem with their bank then instead of dealing with it they jump ship and sign up with another bank. They are the same when it comes to relationships. Their negative attitude can be catching if you spend too much time with these people.

At the end of the day, having a good attitude will stand you in good stead and that is something that “you” and “you” alone are responsible for.

www.robertastewart.com