Finances Analysis ? Good and Bad Debt ? Smart Finance ...

Although it is possible to live completely debt free, it is not necessarily something intelligent. If we average at the population level, there are many people who earn enough money to pay cash some of the purchases we do in our lives: A house, a car, education, travel, etc. One of the most important considerations when purchasing with a credit or a loan, if the debt is good or bad.

A good debt is an investment that will grow in value or generate income in the long term. An example would be paying for a private school for our children. Adequate education, even if you have to pay with a credit, increases the value to future workers and increases revenue potential in the future.

Getting a mortgage to get a house is usually considered good debt also. A mortgage is deductible when it comes to paying taxes, and although they are often long-term payments (usually over several years), payments rarely cover the full salary of a person allowed to use the rest of our money in other investments and expenses. Currently there is the fact that a lot of people is hanging in an awkward position because of the financial crisis that is happening globally, but although a home is a debt, in the end it will provide long-term benefits.

A vehicle loan is also considered a good debt, particularly if the vehicle is essential to your work. Unlike houses, cars and trucks lose value over time, and it also generate expenses.

Bad debts are debts obtained by buying things that quickly lose their value and do not generate revenue in the short or long term. A bad debt is also having an average of very high interest, such as credit cards for example. The general rule is to avoid these bad debts: If you can afford it and do not need it, do not buy. If you buy a pair of luxurious shoes for 300 dollars with your credit card, but you have the red and difficulty level in the card account, the shoes will end up costing more than $ 300 you?ve spent initially because of the interest. So, how to know if you are spending your money in a good or bad way?

These tips can help you:

If you need a loan: Think carefully in what are you going to buy with that! If you are investing in a new business, this is a smart debt because you will make a profit of that, but be sure that when you analyzed the business, you add the interest rate of the loan to your expenses.

If you are going to buy a bigger house, think that you would have to pay bigger taxes for a bigger house, so, think if you are spending your money smartly and if your monthly money entrance will be enough to pay both: the mortgage and the taxes.

Same thing with cars? cars produce a lot of expenses? can you afford it? Some basic strategies for money management, you can control the finances and start saving for the future. These are 5 steps for families to settle finances:

1. Set a budget. When you can see clearly where you spend your money, you can plan and use their resources accordingly.
2. Spend wisely. Having established a budget, know how and where to cut expenses.
3. Pay your bills on time. Keep a calendar of due dates and how much should each month. Make sure you pay your bills on time to eliminate fines and late fees.
4. Save for emergencies. Identify ways to save a preset monthly amount, say $ 20. With an emergency fund, you?re ready for the unexpected.
5. Get out of debt. Start paying more than the minimum amount each month and try to get rid of all your debts.

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