Learning to manage debt wisely is an important part of reaching your financial goals. The first step is understanding debt and how to use it to your advantage. Here’s how to get started.
When Is Borrowing the Right Move?
Is it “good” or “bad” debt?
Invitations to open new credit accounts are everywhere you look ― in the mail, on TV, in stores, and online. As tempting as they may be, it’s important to carefully evaluate your financial situation to determine if taking on more debt is a wise choice. Start by answering these key questions:
Before you borrow, determine if the debt you’ll be taking on could have a positive or negative impact on your finances.
- “Good” debt may help you reach your life goals. A student loan or mortgage is an example of debt that may have a positive impact on your future. This type of borrowing can be seen as an investment in your future. Make sure the payments and fees are manageable for you in both the short-term and long-term before you take on any new debt.
- “Bad” debt provides no long-term return. Taking out a loan to finance a vacation or using credit cards for shopping sprees, recreation, and dining out will only put you deeper in debt and increase your monthly payments.