Thursday, May 3, 2012

Should I Borrow Money?

Many people borrow money but you don’t have to follow suit. Think carefully the real necessity before you commit. Say “no” to avoid unwanted burden.

(Happy coins bag, a photo taken by the author)

The convenience of borrowing money lures people get into debts more often and the accumulated amount could be large if one keeps overestimating his ability in repayment. Overdraw chronically is like a running snowball that can’t be checked and its growth will make our life miserable. Thus, always ask yourself “Should I borrow money?” Think harshly and exercise sufficient self-control to avoid falling into the money pit.

Circumstances that one shouldn’t borrow money:

1) The item is not a must.

Consumers face many temptations daily. We are tempted to buy new clothes, bags, shoes, cell phones and so on. Sometimes, extra piece is unnecessary. Whereas, some desires are surprisingly transient and a rapid purchase will only result in unwanted waste.

2) There is an economic downturn.

Banks and other lenders always face difficulties in recruiting customers during an economic downturn. They will offer low interest rates to bait us borrow money. Be mindful of the shrinking job markets and it’s wiser not to borrow money at this unstable period.

3) Old debts are still hanging.

Some people are too accustomed in borrowing and fail to save enough money clearing the old debts. When emergency arises, they simply borrow more money, pay more interests, and endanger their personal finance to a new difficult level. It is more important to break the bad habit of borrowing and clear the old debts first.

4) You have other sources to earn money.

It is always advisable to save part of salary for future use. If you have no saving to meet the new needs, explore new sources of earning money, for example, have a part-time job, sell unwanted or no longer used items to cash money.

5) You have no feasible plan to clear debts.

Some debts are on a lump sum basis; whereas, others are in the form of installment. In either case, borrowers need to reserve money to pay the requested amount on time. If you can’t work out a viable plan on putting aside enough money for this purpose, don’t borrow money.

6) The future is gloomy.

Gloomy future may appear in various aspects such as political instability, crisis of world finance, poor career prospect, unstable relationship and personal health deterioration. It is wiser to delay consumption and focus on saving money until the circumstance is no longer gloomy.

7) You are not ready to commit.

Many people borrow money to buy a house, get married, and set up their family. The borrowing amount is often huge and it takes many years to clear the debt. Plan carefully and have a harsh self-assessment on whether you are ready to commit. Make sure you really know what kind of living you want to have, the degree of self-discipline required to settle the payments, and the difficulty making changes afterwards. If anything goes wrong, the financial burden and unwanted commitment will become a great stress that could be hazardous to one’s health.

Don’t make haste at borrowing money but ponder over the issue in an all-round manner. Seek a third advice (expert level if possible) to help you see the circumstance from a more realistic and long-term point of view. You could avoid the worse-off potential more confidentially then.

Author’s note:

Many people borrow money via the use of credit card. Wise use can be harmless if the amount is never large and you can reserve money to settle the balance on or before each payment deadline. Welcome to check out the following two articles for more details.

Maximize Eight Benefits of Your Credit Card

Use Credit Card Wisely and Leave No Debt