No-Fail Tips for Wise Debt Management
December 12, 2016
Debt—it’s so easy to accumulate, but can be extremely challenging to pay off once in over your head. That’s why the best advice is to be proactive and not take on a heavier debt load than you can afford. Here are four no-fail tips to help you manage your debt wisely:
- Avoid the student loan debt trap. For students, it’s important to consider how much debt they can realistically pay back once they start working. For parents, it’s fine to help out your kids as they earn a degree, but don’t put your own financial future (i.e. retirement) at risk to do it.
- Don’t make yourself house poor. While it may be easy to talk yourself into a more expensive loan for a bigger house because interest rates are relatively low, consider that the average mortgage is maintained for only seven years—making it harder to build equity because the majority of the mortgage payment is going to interest. Plus, buying too much house makes you a slave to working just to pay your mortgage, which can be a real stressor.
- Say no to credit card debt. High-interest credit card debt has no place in a sound financial plan. If you are buying things before you can afford them using your credit cards, make a personal pact to stop, reduce the number of cards you have, and create a budget so you can stick to buying what you can afford.
- Protect your nest and your nest egg. Whether it's paying off student loans for your kids, taking care of your own consumer debt, or making house or car payments for family members who may be in financial trouble, do not tap into the equity you have in your home to help out. Otherwise you may risk putting a permanent dent in your personal wealth.
Keep the above tips in mind as you use credit cards, consider taking out loans, or think about tapping into hard-earned home equity to help out a struggling family member. You may want to share this information with others, too. If you have any questions, please contact our firm.