Is it possible to live debt-free?
In this day and age when having debt is a way of life people can jump from one debt
to another without realizing what the consequences are.
Debt is a scary word for many
mainly because people often resorted to having bad debts. In my opinion, it
would be acceptable to be scared if we have so much debts but I realized lately
that debt is not so bad after all.
There are two kinds of debts and
this was properly discussed by Aya Laraya, a money expert in the latest Money
For Life talk last September 17 wherein the primary topic is debt.
Now how do we define good debt from
bad debt? Let me put it this way- a good debt is when you owe money to use for
stuff that in a long run will have some value while a bad debt is owing money
to buy stuff that depreciates or cannot increase in value. This is a valuable
lesson I learned from the recent Sun Life Money For Life session.
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| Mr. Aya Laraya for Sun Life Money for Life talks about debt |
That are a gazillion reasons for
people to owe money it could be for a new car, a lavish dinner out, a new house
or for groceries. But have you thought about whether the things that you are
indebted for will fall under good debt or bad debt?
What
is good debt?
A good debt can be considered as an
investment. This is where you owe money that has been put to good use and can
potentially earn income as the time passes.
An educational loan and a business
loan are just a few samples of good debt. These types of loan are being used
with goals that could improve a person’s or business’ financial standing and increase
income potential in the future. This is the type of debt that has financial
leverage.
What
is bad debt?
Debts that drain your wealth are
considered bad debts. It is really all common sense- bad debts are something
you cannot afford to pay and have no capacity to “pay for themselves” in the
near future.
A bad debt is often created when making
impulsive purchases. Bad debts are used to buy items or for paying bills which
have no potential to grow money. This is a debt that should not be considered
in the first place since this will just incur more debt through interest for
things that you could have pay in cash. Credit cards usage for shopping or
dining is a great example of this.
Ask
yourself these questions and with every ‘no’ answer it means it is a bad debt:
- · Will this money I will borrow increases in time or improve my finance?
- · Is this purchase really a good deal considering the interest it will incur?
- · Are the monthly payment options easy to pay?
- · Are the terms and conditions fair and will work for my benefit?
At the recent Money For Life session
with Mr. Aya Laraya, I’ve learned that debts can be either good or bad. And
knowing the differences is the vital key in planning your finances.
If you want to have an opportunity
for your money to grow, you could always check out Sun Life Financial Philippines. They offer sound financial planning tailored
for you through their competent Sun Life advisors.
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