Although the word debt has a negative meaning, don't let that fool you. Although there is a risk involved, there may also be a valuable tool on the other side that can help you accomplish your goals.
Of course, being in debt involves owning money, especially interest-bearing which need to be paid back. However, certain debts are better than others. Major goals like being debt-free after graduation or owning a home without a mortgage are easier to complete with good debt.
A bad debt adds to the difficulty of accomplishing your goals because it forces you to take on unnecessary expenses. Sure, these products provide you a short time high, but after that--what? The moment you put on designer clothing, its worth starts to decrease. And soon, the latest digital gadget will be in your drawer. If you're serious about achieving your goals, it's a good idea to avoid bad debt.
Good Debt: Investing in Your Future?
Think of good debt as borrowed money that you use to build important aspects of your life. It's about borrowing with purpose, with the intention of building a brighter future. After all, having good debt allows you to acquire useful things and ultimately increases your wealth and pleasure. Maintaining your payments can also help boost your credit score. This will be useful for any other important purchases you may want to make. There are several categories of good debt. But keep in mind that even good debt can become bad if you take on more debt than you can reasonably repay, or if the interest rates are too high.
Here are some relatable examples,
Student's Debt: The cost of college might be extremely high. It's a problem that seems to get worse every year, with expenses growing faster than inflation for several decades. As of August 26, 2022, the Reserve Bank of India (RBI) estimates that India's student debt totaled Rs 1,45,785 croredata source. Due to high interest rates and a lack of job security, students who depend on education loans to fund their studies are under a lot of pressure to repay their loans.
On the other hand, debt from college indicates an investment in your future earning capacity. These loans function like to sowing seeds for your future. You may develop your potential and create opportunities for greater employment possibilities by investing in your education.
A degree may not be seem as an asset like a house, but you can think of it in the same way as your financial potential. Investing in education can reap lifelong dividends in the form of higher average salaries.
Small Business Loans: Have you ever wanted to start a business based on your passion? Your small company loan could be the key to your succeeding as an entrepreneur, promoting growth and creativity in the industry of your choice.
Unfortunately, a lot of small businesses fail, and it's possible that the one you are considering to launch will be one of them. But it might end up being not just excellent debt but terrific or even awesome debt if you've done your homework, crunched the figures, have a plan and are willing to put in the work to make it work.
Bad Debt: The Pitfalls to Avoid?
What do these good debt examples have in common? All of them direct you toward your goals. On the other hand, bad debt is the opposite. If having good debt makes things easier for you, having bed debt is like swimming against the tide. If you're not careful, bad debt can be like quicksand and slowly drag you under.
Here are some examples of bed debts,
Luxurious Goods: A lot of luxury depreciate assets. They serve no use other than being shiny and dazzling. Although a pair of 1980s Air Jordans in perfect condition would fetch many times their original retail price, most luxury items lose value with time. If you have the means, there's nothing wrong with living in luxury. But financing it with debt will cause you to lose direction.
Credit Cards: We've all pretty much dealt with this one. It's likely that you are aware of the high interest rates associated with credit card debt and how easily things may spiral out of control.
Using a credit card on an impulsive purchase may make you feel better right away, but frequent credit card use creates a vicious cycle of high-interest debt that's hard to break. It's like every time you move, the hole gets deeper.
The Final Words
Consider if borrowing money is moving you closer to your objectives or further away from them before you take a debt. And moderate practicing of debt is the key, even when you have good debt. Consider debt to be similar to food. Anything that is not good for your stomach, is almost always harmful. However, the beneficial things are only beneficial to an extent, and they may even be harmful if you get carried away.
So, going with a fully fledged plan of how you will be utilizing your debts and how that utilization going to give you fruits for your future decides whether you should take it or leave it.
Good luck with your debts!
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Games I play on Hive
| Games I play on Hive | Game description |
|---|---|
| Terracore | Terracore is an Idle mining game based on Hive blockchain |
| Rise of the Pixels | ROTP is a Web3 browser game about game development on Hive |
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