by Heather, June 13, 2011
One of the major reasons that the economy around the globe has suffered so much over the past few years is that individuals and businesses have been unable to repay the loans and other debt, which is under their names. The inability to repay this money not only affects that person or company, but also influences banks, other financial institutions, and their members. The solution to this problem is to learn to avoid debt to the extent possible.
First of all, it should be noted that there are times when loans should be sought after. For example, obtaining an education is a good investment and often times can only be achieved by means of a student loan. Students should not, however, take out more money through loans than they will be able to manage. Also, home ownership would be almost impossible were it not for the invention of mortgage loans. These are a few of the rare exceptions when debt can be considered “a good thing”.
On the other hand, there are a million situations in which unnecessary goods could be obtained if debt were taken on. One person may feel that purchasing a brand-new car is “essential” and loans are a necessity in order to obtain the vehicle of choice. This person does not understand the difference between a “need” and a “want”. Transportation is almost always a necessity in the world we live in, but luxury transportation is not. There are many vehicles, which can easily transport you to and from work that would not require taking out lavish loans.
One form of debt which people should always keep under control, and avoid if at all possible, is credit card debt. It is interesting how many people do not even view credit card swiping as a form of a loan, when in reality it might be the worst type of loan. Most credit card interest rates run upwards of 15-20% and families can eventually be held hostage to the interest alone on purchases of groceries, gas, clothes, and other small items, which slowly pile up. If you feel that a credit card is a necessity in your life, be sure to pay off any debt as quickly as possible in order to avoid large amounts of interest.
Those who have learned to avoid unnecessary debt are often those who feel financially secure and at peace with their possessions. While debt may be required for some aspects of our lives, it should certainly be cut out of the majority of our purchases.