According to a survey by PricewaterhouseCoopers, more than 53% of workers stress over finances. This isn’t really a surprising number when you consider that the average U.S. household with debt owes $134,643.
During the course of your life, it’s likely that you will probably run into some sort of debt. For whatever reason, you will probably have to take out a loan in order to fund life’s necessities. While there is some good debt to have, there is also debt that really should be avoided as debt is one of those things that can pile up and spiral out of control and before you realise it you’re in a mountain of debt that you’re struggling to get out of.
As mentioned there is some good debt, so it’s not all bad news, but it’s important to avoid the following types of debt to make sure you don’t end up in more than you need to be.
Credit Card Debt
Credit cards are so easy to get carried away with as you can so easily use them, spend what you don’t have and can’t afford to pay back. If you can use them carefully and discipline yourself to pay everything off when you need to then, of course, they can be good for earning air miles or other benefits, but if you know you’re not going to be able to do that – why do you need a credit card in the first place? Then it’s better to steer clear. They come with ease and convenience, but they also have a high-interest rate, and these can be nasty, especially if you forget your payment or extend your repayments. If you are thinking about getting a credit card, make sure you consider how much you are earning, what else you need to spend money on, what your buying behaviour is like and the card’s interest rate. This way you can do all your sums beforehand, and it will mean you can see if you can afford to pay off the credit card repayments. Also, only use your credit card in the case of an emergency rather than to treat yourself, it’s not free money.
Student Loan Debt
While education is very important and if you are looking for a career where you need a degree and know you will be guaranteed a job with a high salary then go for it, but if not then going on to university is not something you should do on a whim because you’re not sure what else to do. The cost of college and university degrees is increasing and the uncertainty of employment at the end of it has meant that many students have had to rely on loans for the education which has led to a large number of young adults now swimming in debt well before they have even graduated or even gone for a job interview. On-the-job training and work experience can be far more beneficial in many jobs than a degree can. If you are in debt from your student loan, there are ways that you can get help now, such as a student loan debt settlement program from https://www.mccarthylawyer.com/. This is where a licensed attorney will contact your student loan lenders and will begin a negotiation process to significantly reduce the interest and principal the lender claims is owed. At the end of a successful student loan settlement, you will end up paying only a fraction of the original balance claimed by the lender and the rest of the debt is forgiven by the lender and the settlement is a full and final settlement of the debt, leaving you without the burden of student loan debt going forward and this can all be done without filing bankruptcy.
Car Loan Debt
Cars are very expensive but something that people do need and something that that many people get a loan for. When buying a car, many people forget about the running of a car and just think of it as one, one-off cost. However, there is a lot more to buying and owning a car. The upkeep of a car costs money; there is the cost of petrol, tolls, servicing, registration, road tax, roadside assistance and car insurance to consider as well. When going to buy a new car, make sure that you take all the expenses into consideration, and try to save up the largest deposit that you can afford so that this will reduce the total amount you need to borrow and reduce your high-interest repayments overtime.
Credit cards are bad, we know that, but payday loans are so much worse. While you might think they’re going to get you out of a fix in the short-term and get some money in your bank account quickly, the finance charges are extortionate, and you could end up paying far more than you borrowed in the first place.
Now for the good debt that you shouldn’t stress about or worry that you’re doing something wrong by taking it. Basically, anything that increases your net worth or has future value, is good debt, that is compared to is it’s something that doesn’t do that, and you don’t have the cash to pay for it, then it’s bad debt.
Examples of good debt include taking out a mortgage for your home, investing in yourself, or consolidating debt. While each of these may put you in a hole at first, in the long run, they will make you better off.
Taking out a Mortgage
There is no better debt than a mortgage. First of all, you need somewhere to live and if you’re going to have to live somewhere, then why not live somewhere that increases in value every year. Makes sense, doesn’t it?
Small Business Loan
If you want to start your own business and have a great idea, have done your homework and you know you’re going to make a load of money from it, but you just having got the initial funding to get started then a small business loan is ideal and not a bad debt if you have done your homework, done your maths and know you can make it work. If you have enough ambition, drive and know-how, then borrowing money to start your own business could be the best investment you’ll ever make.