Playing the game of life and debt

In life, mistakes come and go. We commit errors caused by poor judgment or just plain ignorance. While many of these mistakes deal with life in general, some are bad choices that lead to financial disasters, the most common of which is debt. The good thing is, most of these errors can be fixed.

Debt is not the actual mistake or the culprit, but the acts that brought it to your life. Whether it is an act of recklessness, or an impulsive move caused by ignorance, it makes debt a mere by- product. Debt is a consequence you would face after making poor life choices and decisions.

The different forms of debt

You can find debt in many forms, not just financially. You may be indebted to someone who has helped you in some sort of way. However, you should treat a monetary debt the same way you would a debt of goodwill. You need to find a way to repay it. Although there’s no accompanied obligation in the latter, you need to find a way to pay.

In life, there’s what we call peer pressure, which can affect our course of actions negatively. The same theory also applies in spending, which can put us in a bad debt situation. Although we may not know it, sometimes we tend to buy what others buy, or what others tell us to buy. If people are raving about this latest gadget, we tend to want it badly as they do, because that’s the only way we can cope up. Just like a teenager needs to resist peer pressures, we should also be able to resist temptations when it comes to spending.

Debt Accumulation

Sometimes, personality plays a major role in debt accumulation. If you’re the type of person who doesn’t think before you act, you’ll most likely get trapped in debt’s pitfall. In order to prevent this from happening, you need to curb your impulsive side. Leave your credit card at home, or better yet, freeze it or destroy it completely. This way, you can avoid impulse buying.

Erratic behaviour

Behaviour is also a factor when dealing with debt. One person might not be able to sleep at night knowing he owes someone a huge sum, while another person might simply not care. In paying off debt, behaviour is also a factor. While some people are alright with dragging debt along their entire lives, some people want to get rid of debt as quickly as possible.

With what’s happening in the economy, it’s hard to stay away from debt. What we need to do is to accept that sometimes, it’s an unavoidable circumstance, the only option you are left with. Life can be filled with tragedies, and no matter how much you hate it, debt can be your saving grace. Debt alone is not something to be avoided at all costs, but the activities, personal traits, and behaviours that predispose you to it. Moreover, in the event that you find yourself in debt, you must know how to pull yourself out.

Why take a loan in the first place?

A loan is a form of debt, an obligation that you need to pay. In this modern time when economy is unstable, credit cards make the world go round, and debt is understandable, securing a loan may actually be a worthwhile undertaking, especially if you really need the money. Loans such as these ( carry a higher than normal rate of interest, so you must approach them with extreme caution. Failure to repay these loans will result in serious consequences, such as bailiffs etc and more than likely higher charges applied to your account.

image007However, different individuals may also have different perceptions of “need”. You need shelter, in turn you may also need the furniture to adorn your home. You need food, you also need to have a box of pizza delivered to you every night. You need clothing; you need new pairs of heels for an upcoming event. You need to socialise; you need to go out every weekend. Most financial advisors will tell you to stick to the basic necessities for survival, but it’s easier said than done.

Especially if you are spending borrowed money, you need to exercise more caution than what you usually will if you were spending cash. The following are sensible uses of loans that might actually justify your reason for taking them.

As payment for education

One of the most common types of loans is student loans. Sad to say, but there’s a price to pay for education. While some are fortunate enough to be supported by their parents, others do not have sufficient resources to aid them in their educational pursuits. Student loans offer “study now, pay later” options, which can transform every dream into reality.

To Finance a Property

Owning a home or a car is just every family’s dream, and for most, a lump sum amount to pay for them is just beyond the realms of possibility. Although some may argue that those are luxuries that could just be put at the back burner, most people consider them as basic necessities, which nowadays could not be denied. Taking a loan makes purchasing those rather expensive properties affordable for the common worker. More importantly, it promotes motivation whenever the buyer sees where his efforts are going to.

For Entrepreneurial Purposes

If running a business is what you are born to do, it can be frustrating to ignore those ideas that have been in the back of your mind for decades because you have no enough capital to make them happen. One smart use of loan is to fund a business, or if you have already started out, you may also need the loan for expansion. This way, you can achieve your entrepreneurial goals sooner. You can even use the business itself as collateral and use the earnings to pay for the loan. Aside from business, you can also spend the loan money in other forms of investment that may seem profitable to you.

For Debt Consolidation

Although not a very advisable practice, many people secure loans for the purpose of consolidating their other debts. You should remember, however, that debt consolidation doesn’t address the actual reason why the borrower got into debt, but can significantly lessen the impact of debt in his life. Although you’ll most certainly end up paying more if you consolidate your debts, it can make the handling of one’s finances easier.

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