Your financial health is a very serious matter. While most people do not think of their finances daily, our financial health is rooted in attitudes about wealth and spending behaviours. Whether it is how we shop for groceries to our saving habits, good money and debt management can open doors to financial opportunities, and conversely shut doors on them as well.
In a world where debt has made even purchasing a home or getting an education accessible to so many, learning to manage money and debt is a crucial life skill. Debt consolidation loan providers like Latitude Finance will all tell you these life skills help you avoid the murkier payday loans and unreasonably high interest rates.
Keep reading for just some reasons why managing your finances and debt are crucial for your financial future.
Money management skills are very important because these skills help shape our financial behaviours, behaviours such as paying for high end clothes, shoes, phones, and other products. Without the salary to support these types of purchases, this behaviour can have a few consequences. Because the costs associated with name brand products are excessively high, sometimes into the hundreds of dollars, a person can find themselves indebted to several financing companies (credit cards).
Almost like a snowballing effect, as the cards balance maxes out, the interest rates climb and the person finds they can no longer afford the high-end products or the cards they were purchased with. If not reined in, these debts can lead you into financial purgatory where you spend anywhere between five and seven years trying to repair your credit.
Conversely, while we are often sold on the idea that debt is bad, the opposite is true. The ideal situation would have it that we pay cash for everything, but in today’s consumer-driven society, it is virtually unheard of and impossible. Debts related to home purchases and education loans are not seen as being as detrimental to a person because they help establish credit and they are definitely investments as opposed to credit card debt, which has no return on investment (ROI).
Knowing the difference between good debt and bad debt and knowing how to manage your debt can steer the course of your future. As a part of any money management plan, putting away a little a savings every payday can pay for future financial goals and help you during emergencies. By discerning between debt types and saving money, you can establish a management system that prepares you for larger financial purchases and overall financial health.
Debt can be managed in a few ways. Conventional wisdom states you should focus on paying one debt off, and as you pay off that debt, take the money and apply it to other debts. This tactic is a great one but should be in conjunction with establishing a savings account. Even if it means saving small amounts of money every month, you are establishing the habit of saving, and after a while, that small amount you have stashed away adds up.
If you do find yourself in a situation where your debts are out-of-control, a debt consolidation loan can help alleviate some of the financial pressure of doling out payments and paying excessive in interest monthly. These programs prevent you from going delinquent on your obligations, and worse yet, prevent charge-offs reported on your credit report. Over the long term, it can help you reestablish your credit.
Consequences of Money and Debt Management
The consequence of managing both your income and debt is reflected directly on your credit rating. This rating is of such import because it determines whether you are approved for credit and the loan type. More significantly, it determines the interest rate, and when applying for larger purchases, you do not want to have thousands of dollars added to the principal of your loan because of high interest. Simply stated, good money and debt management gives you access and more options to secure your financial future.