Saturday, April 28, 2012

Is running into debts a dangerous practice today?

It only depends on what you do with your debts.
Debts may lead you to bankruptcy but they can also make you rich.
Only through a decent Financial Literacy you may be able to decide (as the ball is always in your hands) what to do.
First of all it is absolutely crucial to know how debt may help yourself. If you buy a car, a tv set or you are refinancing to buy new furniture, you run into debts to buy goods that will lower their value with time. This is a road that will certainly drain your resources..
On the other hand you can decide to purchase goods that are going to increase their value and that will eventually provide you with a stable income. If this is the case, debts could make you richer.
I use the conditional mood because you have to weigh the pros and cons: interest rate, Return on Investment and the tax regulation. Indeed if you overborrow that’s a risk too. In order to know if you are on the right track, my advice is to check your cash flow.
Indeed it’s a steady cash flow that ensures your debt repayment.
When you think about refinancing, like through a home equity line, think first to the possible cash flow eventually coming from that debt. 
Luigi Foscale

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