Author: admin

We often hear things about good and bad debt. We think that we are okay to have good debt but we should not have bad debt. However, it is not always that easy to tell the difference between good and bad debt, so how do we decide?

Some debt is very easy to classify. If you decide to use a student loan to go to university, then this would be considered good debt as the repayments are means tested, then you only have to pay it back when you can afford to. The debt is also written off after thirty years. If you use an unauthorised overdraft to buy a new mobile phone, when you already have one that works and you do not think about the cost of the borrowing, just about getting the phone, then this would be bad debt.

The problem with most types of debt is that it is not really easy to classify whether it is good debt or bad debt. There are so many types of borrowing and so many circumstances when you borrow that there is not just one set of good and one set of bad debt.

It is always important to think hard about debt before you use it. Make sure that you consider whether you really need to borrow the money; whether what you are spending on is really necessary or whether you can wait until you can save up or until you next get paid before buying it. Then you need to consider which type of loan you need. There are lots of different ways to borrow money and you need to make sure that you are using the best one for the amount of money and the purpose that you are borrowing. Once you have considered this, then you need to compare different lenders and see which one can give you a loan at the best rate. You also need to think about which lender you think offers the best service as well as the best price so that you get the best value for money. Lastly, you need to think about the repayments. Consider what you can afford in the way of repayments and whether the loan that you have chosen is affordable for you. If you are not sure whether you will be able to manage the repayments then take a look at previous bank statements and specifically what you tend to earn and what you tend to spend in a month and see whether there will be enough left over to repay the loan. If you have a credit card or store card, then you may think that you will not need to worry about this however you will need to pay it back eventually and the longer you leave it, the more expensive it will be. If you think hard about all of these things then it is more likely that you will be taking on good debt.

It is easy to think that the main difference between good and bad debt can be what you are using the money for. Perhaps good debt would be a mortgage to buy a house and bad debt an overdraft to buy some jewellery. However, things are never quite that straight forward. We never buy things without good reason and so we need to think about why we need the items and whether we can justify the expense of borrowing money to pay for them. Whether we can or not will very much depend on how much of a risk taker we are and our general attitude towards money. We will need to weigh up the pros and cons and think about whether we personally feel that borrowing is the right decision for us.

Really, as long as it has been a decision that we have considered carefully, we can afford the repayments and we understand the consequences of it, then it could be considered to be good debt. If we are spending without considering the consequences and not really thinking about what we are buying and why we are buying it, then this is bad debt. It can be difficult still to decide, so it can often be wise to discuss your decision with friends and family to see what they would do in that situation.

At the moment there are many people struggling financially. Many people have not had a pay rise for a long time and with prices rising, it means that there is less and less spare money. You may feel that you have tried everything that there is to manage in times like this and just feel that an economic boom and a pay rise is the only answer. However, you may find that there are other things that you can do yourself to help, rather than relying on the economy picking up, which could be a long wait.

It is worth addressing this problem in two directions. Make sure that you are getting paid as much as you can and that you are not overspending unnecessarily. Getting paid more is the area which can be more difficult. It is not always possible to ask for more pay or to work more hours but there are a few other options which could appeal to you. Selling items that you own is an option for some people. If you have a lot of things that you no longer want or need, then you can consider selling them so that you can make some extra money. Although this will not give you a regular income it could help you out of a tight spot, perhaps help towards the cost of repaying a loan or pay some bills. It can be a good thing to do as well, because you will see how much less you get for items when you are selling them and so if you have not got a lot of use out of them, then it may make you think harder about whether you want to buy the items in the first place.

Another way to make some extra money is to do some extra work outside of your normal job. Some people may be happy to take on a second job, but many people find that this is not possible or not something that they would like to do. If this is the case for you then you will need to think about what you might like to do, whether you want to apply for a standard evening or weekend job, whether you want to do freelance work from home, start a business or something else. There are lots of opportunities available, it is just a matter of finding one that suits you, your skills and the time that you have available.

It is also wise to cut back with your spending as much as you can as well. To start with it is good to compare the prices of the things that you are buying to see whether you can get them cheaper elsewhere. Use comparison websites for utilities, banking, insurance and supermarkets and you will be able to see whether you can just spend a little bit of time doing some research and maybe a few phone calls and you could end up saving money without doing very much at all. It is useful though to also see whether there are any things that you can stop buying which could help you to save money as well. Consider things like subscriptions, clothing, shoes & accessories, household goods, evenings out, take away food and holidays. It can be difficult cutting back on things that we enjoy, but if you need some extra money then you will need to find a way to cut back and luxuries are the area where you can do this without suffering so much.

It is worth setting a goal with regards to your finances. Think about what you want to achieve with your financial situation. Actually calculate some figures, perhaps how much extra you want to earn, how much less you want to spend or both. Then you will have something to aim for. Also note down the reasons that you want to do this so that you can use this for motivation whenever you feel that it is too difficult for you to manage.

There is a lot that you can do to change your financial situation. It will mean that you will have to make changes though and you will need to be prepared to do this. It could mean that you will have to put in more hours of work or that you will need to go without buying so many things. It can be tough but it is worth it if you feel more relaxed with regards to your finances afterwards.