3 Golden Rules to Avoid the Debt Trap

To avoid debt don’t get a loan — easy is not it?

Sometimes we can’t avoid having to invest otherwise how are we to receive our new residence? Not many people would have the cash to purchase it. But what you want to understand is that there is great debt and there is bad debt.

So what is great debt? Fantastic debt is for things that appreciate in value such as home, or a prosperous business. It has the capability to earn an income or to raise your earning capacity (for instance, a loan for schooling).

Poor debt on the other hand could be a charge card that’s never paid in full each month. Bear in mind that expensive new restaurant you tried for that special night out? The night outside has gone, the food consumed as well as the wine drunk. If the credit card has not yet been paid in total that supper has probably dropped in price and the interest is currently what’s causing the heartburn and headache.
• The rule is to just borrow for things that appreciate in value.

What about a auto loan? Is this good or bad? Well, you need to save to purchase a car but when transportation is essential (rather than only a desire) sometimes you might have to borrow. But make sure it’s the lowest amount possible as a automobile depreciates as soon as it is driven off the lot. And it is really easy to wind up owing more than the vehicle is worth. Better yet get a inexpensive car that can get you out of A-B and SAVE for an update.

• Golden rule two — pay your credit card in full each month. Only place thing on your charge card that you know you can cover when the bill comes in.

Do you actually want the latest technical gadget? So why can you go out and use a charge card to purchase an expensive electronic gadget when it’ll reduce its value after it is bought? My laptop cost almost $6000 a couple of years back and today appears outdated, is slow and does not do half of the things I could currently get for $1500. Luckily I didn’t borrow for the purchase — I could still be paying off it and feeling quite sick!

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Shop at the sales — many people love to receive a bargain. But don’t get carried away by purchasing something that’s too little (you are likely to lose weight, yeah right!) And ill fitting or something which you wouldn’t even look at purchasing normally at full price. That bargain may wind up indefinitely with the price tag hanging off, and that’s not a bargain.

In your budget you need to have catered for clothes so adhere to the limit you set yourself and don’t load up the charge card.
• Golden rule three — set up a budget and permit for savings, emergencies, tithing, bills and spending (that means entertainment too).
Credit cards never seem to reduce when you pay just the minimal — the payment often covers the interest with barely much more. And interest on credit cards is among the greatest you can get.

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Used wisely credit cards can save you money but utilized as an endless supply of cash and spending you’ll end up on the debt merry-go-round.

Be a smart credit card user, and always pay the accounts in full on, or earlier, since date. And never spend more than you make and use the 3 golden rules.

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