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Debt: What You Need to Know

Jul 30, 2020

by Casey Messer

What is debt? Debt is money owed or borrowed. The topic of debt goes so deep. There are a lot of tips to be shared when it comes to discussing money owed to a lender. Some feel they quickly get in over their heads with debt and some have already discovered their primary goal is to be debt free. Let us share a few tips that will help you with whatever direction you are questioning.

Many might say there is such a thing as good debt and bad debt. What’s the difference? Good debt is anything that can be considered an investment like a mortgage, a business loan or even a loan for education. Credit cards are a good example of both good and bad debt. Maxing out a credit card and making only minimum payments each month is considered bad debt. This practice makes it look as though you are inflating your income. Using a credit card and keeping a lower balance can help boost your credit score. This is considered good debt.

To maintain a healthy budget and move forward in reaching your goals, many times we ask ourselves, “Am I in too much debt?”. There are several signs that may indicate you have taken on too much debt. Signs like the lack or absence of an emergency fund. Another sign is keeping your bank account at or below $0 after paying bills and before the next paycheck. If your credit cards and personal loans total half or more of your income, this may also be a sign that you have taken on too much.

There are a lot of things to consider when trying to manage your debt. Taking small steps to manage your obligations well can lead you to reaching your goals. Remember to be organized. It helps to make a list of who and how much you owe. This will keep things top of mind and taken care of.

Fore most, a final financial goal is to be debt free. There are a few methods additionally that can help reach this target. Start by using the debt snowball method. This method suggests paying off debt smallest to largest. Do not worry with interest rates, only the balances. Staying on top of your budget and naming every dollar will help you pay more to your debts owed. There are several resources and tools available to you to help with this. You can also meet with a financial counselor at Centric to further help in developing a plan.

 

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