What is debt? Debt is, put simply, any amount of money that you owe to someone. But can it be avoided? It depends on the specific situation of a person or family, and also on the social and economic circumstances at a certain time.
Not everyone is lucky enough to be born millionaires or win the lottery, so the majority of people will need to buy a home, a car, or pay for education at some point. Most likely, they will need help paying for these things, thus putting them in debt.
The best example of debt can be described by a mortgage loan. In order to buy a house, you need a substantial amount of money, which you borrow from the bank. That loan is a typical form of debt that can hardly be avoided, especially if you’re young and a first-time homebuyer. Unless you win the lottery, you’ll need to get a mortgage in order to pay for your home. The same happens with your car. Although you may call it a lease, it is still a loan, and it still generates debt.
One of the most expensive types of debts is credit card debt. Credit card debt is a lot more expensive than a mortgage or any other type of loan because it comes with high interest rates. It’s very easy to accumulate credit card debt and find yourself unable to pay it off, especially if you’re only able to make minimum monthly payments.
Unlike the debt generated by big purchases such as homes or cars, credit card debt can be more easily avoided. If you stick to a budget and follow it religiously, you’ll be less likely to use credit cards to buy things. Through discipline and living within your means, you won’t buy things on credit that you don’t need, especially when you don’t have the money to immediately pay for it.
As easy as it seems to avoid getting into credit card debt, unfortunately many individuals find themselves consumed by it. Banks make it easy for people to get a credit card, and with the likes of online shopping, it can be easy to overspend on your credit card, often buying things you can’t afford.
To avoid debt, you’ll need to focus your efforts on paying off all your credit card debt as soon as possible. High-interest debts should always be paid off first. Although it may seem impossible, the truth is that you can manage your finances adequately if you follow a budget.
The first step to getting out of debt is easy. Contact us today to find out how our counsellors can help you on your journey to financial freedom.