The
goal of managing your credit is to stay out of excessive debt.
Not all debt is bad though. "Good" debt is one that
produces cash flow, whereas, bad debt does not. For example, buying
an apartment building may put you in debt, but it also provides
revenue from rent and perhaps some deductions. Mortgage debt is
also good as it provides a place for you to live and can also
be viewed as an investment.
Examples
of bad debt include debt incurred from the purchase of disposable
items, durable goods, or high interest credit cards. A good rule
of thumb to keep in mind, if you can't pay for it now, ask yourself
if it's something you really need, or
is it just something that you want.
If it's a want and not a need, then the purchase
will just needlessly put you deeper in debt. For instance, if
you open a department store credit card to take advantage of the
15% savings but then can't pay off your balance right away, you
may wind up paying more than full price, especially if the card's
introductory rate jumps to 20%. Always read the fine print, and
don't buy what you can't afford. Avoid impulse buying
at all costs! Create a budget, or a spending plan,
and start a savings account. Know realistically what your monthly
living expenses are and save 3 to 6 months worth in an emergency
account. Tomorrow is not guaranteed and you will have money to
act as a buffer in case something unexpected (a car repair, for
example) happens. This way if anything were to happen, you'll
be prepared, and won't be stressed out with the added financial
burden.
Another
example of bad debt that's not always obvious is auto debt. Sure
you need a car to get from point A to point B, but do you really
need that luxury or sport utility vehicle? When buying a car,
you're actually paying a lot more than the sticker price of a
vehicle if you're only making the minimum down payment. Finance
charges and interest means that you'll be paying a lot more.
And to make matters worse, cars decrease in value the minute that
you drive it off the lot. So stick to what you can realistically
afford rather than something that will enhance your image but
put a strain on your budget.
When
managing your credit, it's also important to keep track of all
of your bills and to know exactly what you're spending. Consider
paying bills online or having them deducted automatically from
your checking account to avoid late fees from misplaced bills.
If your debt (excluding rent or mortgage) exceeds 20%, you may
be getting yourself into trouble. So implement a plan before things
get out of hand.
Additional
Resources:
Studentdebthelp.org:
Credit
click
here
Bankrate's
Credit Management Home Page
click
here
Avoiding
the Debt Trap
click
here
Managing
Personal Credit
click
here
Managing
Your Credit Reputation
click
here
Managing
Credit Card Debt
click
here
5
Tales from Debt Hell
click
here
How
to Opt Out of Pre-Approved Credit Offers
click
here
Sample
Opt Out Letter
click
here
You
Can Get Out of Debt
click
here
YoungMoney
Credit and Debt Articles
click
here
Maintaining
a Good Credit History
click
here
Financial
Basics for College Students
click
here
Control
How You Spend--When and Where You Spend
click
here
How
to Cancel a Credit Card the Right Way
click
here
Quiz--Test
Your Credit Card Smarts
click
here
Quiz--Are
You in Debt Danger?
click
here
Quiz--Is
Debt Affecting You More Than You Know?
click
here
