We’ve grown up in this society where we’re told a few things such as, “all debt is bad!”, “debt is your ball and chain” and “rent money is dead money”. Is life ever really that simple, though? In the case of debt, definitely not.
Before we even go into this conversation, we must think about what the term “debt” means to us. Debt is where someone receives a loan of something, usually in exchange for that thing plus interest. So in exchange for taking the risk of loaning you something, whether it be money or an item, that person gets a little reward. Although, this isn’t always the case.
Have you ever borrowed five dollars from someone to buy lunch because you weren’t going to get paid until Thursday? You paid them back, right? Did you pay interest on that? If not, they were probably your close friend, family member or someone you knew well enough at the time to bypass the embarrassment of borrowing money to buy lunch.
We have less of a problem going to a bank with a request to borrow money because of a few reasons, including the fact that we know that the bank benefits from us going to them. Also, we’re generally not quite as close to the bank as we are to our loved ones.
Our psychological issues with debt& how they drive our behaviours
It’s the same case with debts that one might accrue for other reasons. Psychologically, debt is seen as negative thing because the benefit of the loan has usually already been achieved in our minds. For example, if you borrow money to purchase a house, you may already be living in it and can now only feel, remember and appreciate the negativity of having a home loan.
It’s often the same with credit cards and other forms of debt. At the time, you might be tempted by that present for your nephew or niece and so you buy it. Whether they liked it or not, in the end becomes irrelevant because that debt has already been accrued and you need to repay the money. Naturally, most of us will only remember the burden of the money we need to repay and forget about the happiness that the present you brought for the nephew or niece.
That doesn’t mean that the happiness is invalid, though. The issue is that our problem with debt is all in our mindset. Our mindset tells us to get into debt for many things that only have a short term psychological benefit, rather than a long-term financial benefit.
How to choose the right kind of debt
The first step you should take in changing your mindset is thinking about your long-term financial goals. If you want to spend your life paying off your owner-occupied home, then this article might not be for you – just beware that you’re actually helping the banks get richer as you slave away. If you wish to be financially independent and retire early, then you need to change your mindset and keep reading.
Have you ever heard the phrase that “you need to spend money to make money”? Well, this is applicable to the right kinds of debt too. Your mindset needs to shift from the short term benefit to the longer term financial gains.
The type of debt you should be choosing is debt that can bring you long term financial gain. Examples of such debt include but are not restricted to things like margin lending andinvestment property loans in well-regulated markets.
The average Tom, Dick or Harry might automatically walk away from these ideas because they seem too risky. It’s true that we need to be comfortable enough with the risks we take in order tocomfortably take them. The best thing you can do to ensure that you only get into the right kind of debt with any opportunity, is ensure you have the Golden Rules in place:
- With this loan, only purchase assets you like, that bring in value in the form of future income or capital appreciation; and
- Take every measure you can to protect yourself, such as a put option for shares or landlord insurance for your investment property; and
- Do research (starting within your network) to find the best broker for your needs; and
- Know how the debt will be repaid if everything turns sour.
If you follow these four rules, it is highly unlikely that you will get into ‘bad’ debt.
Rule 1 prevents you from spending your loan on frivolous items.
Rule 2 helps to protect you in the event of your investment failing.
Rule 3 helps you find someone reputable who has a reputation to uphold with both of your networks.
Rule 4 ensures that you’ve planned ahead.
Luckily, many of these mitigants are requirements in well-regulated financial environments and a quality broker will ask you these types of questions before proceeding with putting your loan application forward.
Always ask for help
Just try to remember that there is help out there available to you, so don’t be penny-pinching when it comes to your wealth. If you know of a fantastic financial specialist who can help you pick the best kind of financial instruments for your needs, pay to see them. Just ensure that you know how protected you are under the consumer laws in your country.
Be true to yourself and only invest in assets that you like. Some people cannot sleep well at night if they own a large share portfolio, because they prefer property as an asset. Others cannot stand the thought of dealing with agents and banks, so they go down the road of shares. These are only two of the many asset classes available to everyone – just keep looking until you find the classes that speak to you.
Are you in a bad debt kind of situation? Or are you looking to plan towards your future? Did this article tickle your debt mindset? Let us know in the comment section below.
A Calculated Plot to Lead Through With Your Debts
Leading a hassle free life is probably all man’s want but unfortunately the willingness is probably never fulfilled. However, if you want you can lesser your hassles but it will need a calculated plot to do so. There are facts and figures in which there might be reasons for you to increase some mandatory burdens over your head.
A service person is certain to have a limited income every month. Within this stipulated amount, you probably cannot do many things. Thus to make some assets in life, you need to have some financial assistance from a reliable source.
Making you ascertained with the housing loans
Having a new home is very much in need or rather it is adream fro may. But the present increased price of real estate often forces a person to seek for loans for this purpose. Achieving a dream is good but making sure about the timely interest payment and the timely recovery of the loan is important on the same side. There are many people who finally cannot meet up with his definite feature and therefore lies in debt. This is something where you may be in need of some proficient that will help you in achieving the right way.
Knowing the policies of medical debts
An effectual fact in understanding that medical bills are some uncertain loan taking features. There is often a need of medical assistance in which one has to get assisted with some kind of loan. Thus, to avoid this, check online to know the details of the medical insurances that can reduce your burden. Other than this, there are certain people who have to take a huge amount of loans even after having medical insurances. On this aspect, with the help of the right person, follow the legal rules. There are rules in which over certain conditions government exempts all the financial details from the person.
Some debt management strategies
Apart from this there are various ways what may cause you to have financial debt. But on avoiding them, you can actually reduce half of your debt. Avoiding unnecessary use of the credit card can help in this process. In fact the random shopping with a snob effect set is also unnecessary. Avoiding this will help you in having a relief from the different types of debt. Avoiding seeking loan to meet the different debt is again an important aspect that will ensure you safety.
Reducing the burden
It is important to understand that once you get to complete this entire feature, you are sure to be relieved from any type of financial debt. Apart from this, it is also imperative to know that on arranging the debt settlement policies with the lenders can also help the borrower to have some relief. This can only be executed under the assistance of the some professional who will have a negotiating power with the lenders to help their clients. In fact consolidation is another resolution to reduce the burden of the debt. Thus, follow the necessitated rules and ways to help you.
You can check online for the best way to pay off credit card debt when struggling with debt issues related to credit cards. You will surely get good ideas how to make things go in your favor and lower your worries.