Thursday, May 3, 2012

Should I Borrow Money?

Nowadays many people will borrow money. The decision making is important and we should think over it in an all-round manner before any commitment.

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

Many people have experience on borrowing money through the use of credit card. Even so, we should not overlook the financial risk and overuse our credit. Don't let borrow money run like a snowball. Always challenge the idea by asking "Should I borrow money?" Think carefully and have self-control.

Don't borrow money if......

1) The item is not a must.

People are tempted to buy clothing, shoes, and watch, etc. We often have at least one. Borrow money for an extra piece is unnecessary.

Some desires are surprisingly short-span and may die while you are saving money for them.

2) There is an economic downturn.

Banks and other lenders have fewer customers during economic  downturn. They will offer low interest rates to bait us borrow money. However, job markets often shrink as well. The potential of losing a job is higher and finding a new job often takes more time than usual. Try to avoid new debts in this unstable period.

3) You haven't cleared the old debts.

Many people borrow too easily and don't save at all. When emergency arises, they simply borrow more money and commit to pay more interests. This over-dependency blinds borrowers and disables them to get rid of the debts. They become slaves of interests in the long run.

4) You have other sources to earn money.

Save part of the salary for future use. If you have no spare money, take up a part-time job, and sell unwanted / no longer used items to cash money.

5) You have no feasible plan to clear debts.

Some debts are to be cleared in one payment, whereas others may take a couple of years, in form of installment. No matter which one, borrowers need to put aside enough money to pay in full and on time. Don't borrow if you can't reserve money for this purpose.

6) The future is gloomy.

Borrow money is a risky investment if the future is gloomy. The future can be about political stability, economy, career prospect, relationship, and personal health, etc. To avoid loss, you can delay consumption and focus on saving money until the circumstance is clearer.

7) You are not ready to commit.

Borrow money demands self-discipline to monitor one's debt and payment, and subject oneself to a defined setting. If you don't know what you want, what kind of life you would like to have; borrowing money to spend now will limit future change. The financial burden and unwanted commitment will become a great stress that poses threat to one's health, mentally in particular.

Consider borrowing money in-depth and don't rush.

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