You can and should use debt to make money
Debt can be
used to your advantage to MAKE money, but purchasing consumer goods on credit
will make you poorer as it makes your goods more expensive to buy.
Ultimately,
we all want to avoid ending up retired with mountains of debt and less than
adequate pension. Hopefully, we end up at least
comfortable. If you are in a debt trap,
you need to refinance.
As soon as
you get your first salary you are eligible for your first credit card. These are the most expensive because they
charge interest at 30% without a proven credit rating. However, you usually do not have to pay
interest if you repay your entire balance by the due date. You can therefore save your salary for one
month, and buy all your goods on credit, only repaying when the balance is due
and earn some interest on your salary.
You can also
opt out of paying insurance to cover your balance in case you loose your
income. There is no need for this fee
if you repay your balance every month.
There are also such strict terms on some of the policies that you
practically have to become bedridden before they will pay your balance for you.
As time goes
on and you repay your debt, your credit rating will improve, and the credit you
apply for will become cheaper.
What most
people calculate is whether they can afford the monthly repayment. This is dangerous because you have to pay
back ALL the credit at some point.
The indicator
to watch is your net asset position.
This can be calculated by adding all your assets (things you own and can
sell to raise cash) and deducting all your liabilities (amounts you have to
repay). The net amount should increase
year on year, and you should be accumulating wealth to prepare for retirement.
Some simple
techniques that people use include buying consumer products on 0% credit cards
and saving the same amount to earn interest.
When the 0% period expires they simply repay the debt. Having paid no interest, the interest earned
on the savings becomes pure profit.
More
advanced solutions involve borrowing money to invest in projects that will
accumulate income at a higher rate than the interest charged on the amount
borrowed. If you are new to investments,
it is best to start with an experienced advisor before attempting to invest on
your own.
Cheap
Credit Is Too Good To Be True
Together We Owe
Over £1 Trillion
Debt Can Make Goods More Expensive To Buy
Lending Is Not Properly Regulated
The Threat Of
Insolvency Is Very Real
There Is No Such
Thing As Free Credit
You Can and
Should Use Debt To Make Money