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Mary has just set off in the morning to look for a new house. She looks to get an agent, they should know where the best houses are, she is able to go round a few other houses with another agent and voila she comes across one that she likes. With the deposit and rent paid she moves in immediately before night fall.
In Mary's case the next thing on her mind is figuring how she can spruce up her house at the snap of her fingers, since money is not easy to come by she turns to the nearest bank that can ease her off her misery, with that comes the necessary repercussions.
I’m sure this story runs true for many young adults, we all want to have a place we can call our own no matter the cost. Knowing that, marketers are using it to our disadvantage and coming up with all manner of products that will make us feel rich immediately.
Consumable debt is the easiest to get into, with it, high interest rates are not far behind. The longer you take to pay it off, the faster you end up doubling sometimes even quadrupling the banks coffers.
The key to avoiding debt is to:
- PLAN PLAN PLAN!!!!! This will enable you to set deadlines so you do not take the first offer you get just so you satisfy today's immediate needs.
- In your plan incorporate a SAVINGS and INVESTMENT strategy, this will enable you achieve your dreams faster as the money starts working for you due to the power of compounding...
- If you really have to borrow, PAY DOWN the DEBT AS SOON AS POSSIBLE, how you may ask? Well reduce your spending habits, then channel the additional savings into paying of the principle amount of your debt (this is an agreement you enter into with the bank.
Don't make the mistake of increasing the minimum payment; just ask to make additional payments instead. This will save you a lot of heartache in the event an emergency creeps up on you)
- Use debt to your advantage, by using the money to PURCHASE INVESTENTS that will eventually bring you a HIGHER RATE OF RETURN. A Good example is a piece of land as it has an appreciative aspect and hence may grow faster over the period of the loan.
Now that is the epitome good debt, increasing your wealth over the long run as opposed to taking money out of your pocket, which is the case with bad debt.
Elizabeth Karina.
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