Debt is something that is often in the news and often estimates are made about how much debt each household has on average. These figures can be shocking for some and reassuring for others, but they mean very little as each household varies so much. Some individuals have no debt at all and others have so much that they struggle to manage to make the minimum repayments and so there are stark differences. No one wants to be struggling to repay, but is being completely debt free the best situation to be in?
It is important to remember that there are good and bad debts and that some people can afford debt more than others. For example, getting a student loan to pay for university can mean that you will have a better paid job as a result which can have a positive impact on your life as a whole. Borrowing to buy a home can also be a big positive because it can be cheaper than renting. Once you have paid off the mortgage you will be able to live without paying out each month, although you will have to maintain the home. However, the value of the home should increase with time and it will give you something to pass onto your children or something that you can sell to pay for care if you need it as you get older. There are other situations too, where borrowing can be a big help. However, it can also be a problem if too much is borrowed and repayments are difficult.
Before borrowing any money it is always wise to make sure that you think about how you are going to repay it. You need to consider how well you are managing your money and whether having that extra money to pay out will be a problem for you. If you are already struggling or even going overdrawn regularly then it is wise to rethink getting a loan. If you feel you have no choice and you really need the loan then you should think about where you can cut down your spending in others areas so that you can afford the repayments. If you cannot see any ways to cut down, then you should consider ways to earn more money so that you can afford it that way instead.
Deciding how much debt a person should have is difficult. It is wise, is explained above, to make sure that you can make the repayments. However, it is possible that the interest rates may rise and the repayments increase, so it is wise to have a bit extra just in case. If you think that you job is insecure, perhaps because your company is struggling or because you are on a zero hours contract, then it may be advisable not to get a loan unless you have to.
It is important to be able to control your debt as well. Make sure that you are aware of what debt you have, how much it is costing you, how much you are paying off and things like that. You need to make sure that you are happy about the debt you have and if you think that you have too much then see whether you can pay some of it off. If you have credit card debt, for example, you may only be paying off the minimum when you can pay off more and save a lot of money.
Deciding how much debt to have is a hard thing to do. You need to make sure that you can cope with the amount that you have and that it is not difficult for you to manage the repayments and that it is not too stressful for you. It is worth considering how secure your job is and whether you think that having debts is a risk if you are likely to lose your job and also whether you could cope if interest rates went up significantly. It is good to keep debts low if you can, but being scared of debt could mean that you miss out on opportunities such as university or owning a home, so you need to weight up the pros and cons.