2. Getting Comfortable With Bad Debt
What do we mean by bad debt? Isn’t all debt bad?
We have been taught from an early age that taking out debt is not a good idea and can lead to financial ruin. However, there is one particular type of debt that will almost guarantee you stay poor, and that is consumer debt.
Debt that is taken out to finance consumption is a huge mistake. Whether it’s used to buy clothes, cars, or holidays forever being in debt to credit card, companies mean you work for them and make them rich.
As a general rule when it comes to spending – unless you can pay for something outright in cash, you shouldn’t be buying it. Remember that credit card companies want you to be disorganized with your finances because that’s how they make money.
The average credit card interest rate is 19% which is extremely high and cancels out a majority of the benefits that they provide. While the use of credit can improve your credit score if you pay them on time, people who are just starting to organize their finances are better off without them.
There are some exceptions for using credit cards, and that can be for emergency healthcare, property, and educational purposes, but you still want to pay them off as soon as possible.