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Most of us will find ourselves in some form of debt at some stage of our life. Not only do we live in a time where credit is more accessible than ever before but we also live in a time where there are more things to spend money on than ever before. Living the high life (nice clothes/nice house/extravagant holidays/expensive restaurants) is in fashion and it seems that we as a society are not about to let a lack of disposable income get in the way of having a good time.
Of course, not all debt is created equal and borrowing money to buy your own home is widely regarded as being a wise move, but increasingly even in this arena we are over extending ourselves with mortgages that we can’t really afford.
So how do we navigate debt in a world where it is seemingly inevitable? Here are my top tips:
Know the difference between good debt and bad debt
Borrowing money to purchase an asset that will almost certainly increase in value can be a good strategy for increasing your wealth. Using a credit card to purchase stuff you don’t really need that is going to cost you a bucket load in interest will do the opposite.
Choose a personal loan over a credit card
If you really can’t wait to save for that holiday or you need to purchase a big ticket item like a car, I recommend shopping around for a personal loan rather than reaching for a credit card. Personal loans generally have lower interest rates than credit cards, plus you are forced to pay down a certain amount every month.
Talk to your financial advisor about how much you can realistically afford to borrow to purchase your own home
It can be tempting to stretch yourself to your limit when it comes to your home loan, particularly if it means buying in a suburb you have your heart set on. The reality is that the financial stress this cause is rarely worth it. A good financial advisor Melbourne you will be able to recommend how much you should borrow while allowing for your lifestyle expenses.
Know what to tackle first
If you do find yourself in multiple forms of debt, make sure you tackle the one with the highest interest rate first. Alternatively, consider consolidating your debt in to one personal loan so that it’s easier to manage and keep track of.
Increase your income to pay for luxuries rather than resorting to credit
Consider trying to increase your income in order to pay for luxury items or that next overseas trip. Platforms like Uber and AirBnB make it easier than ever before to make some extra cash on top of your day job.