Understanding Debt – Its Necessity or Luxury; and Consequences (Part 2 of 2)

ADVERT HERE

Understanding Debt – Its Necessity or Luxury; and Consequences (Part 2 of 2)
Debt is basically the amount of money borrowed by one party from another. It could be between people or companies, or a mixture of both. It is created primarily by the difference between income and expense; regardless of its nature and purpose.  Understanding debt is one of the key fundamentals that can liberate people out of unnecessary financial bondage. It is high time people understand debt and its implications on their future and livelihoods. 

The article continues from Part 1:
https://www.tapiwazuze.com/2019/07/understanding-debt-its-necessity-or.html

Understanding Debt – Its Necessity or Luxury; and Consequences (Part 2 of 2)

(a) Avoidable Debt:
Avoidable debt is generally unnecessary. It is preventable if one applies self-discipline. It is created by personal driving factors such as pride, competition, lack of discipline, lack of financial wisdom and poor judgement. This type of type is preventable if one gains better knowledge and understanding of financial management, as well as understanding that life in general is not about competing with others. We all come from different backgrounds, different geographical locations, and different family set-ups and so on. There is no need for you to go out of your way in order to please some selfish egos along the way. 

Some of the driving factors that may lead to avoidable debt include the following:
Keeping up appearance with others. 
Poor investment decisions. 
Poor financial management. 
Gambling, alcoholism, drugs and other addictive vices.
Little or no reserves for life emergencies. 
Unmonitored credit card and over-draft usage. 
Short-term loans to please partners and colleagues.

(b) Unavoidable Debt:
Unavoidable debt is caused mostly by life emergencies that are beyond our control. Normally these are situations of life or death. But even when disaster strikes, it calls for thorough financial decision making so that even in debt we still remain with some leeway to manage it. The resultant loss needs to be minimised because we still have a future to live. 

Understanding Debt – Its Necessity or Luxury; and Consequences (Part 2 of 2)

Some of the examples of factors/issues that may lead to unavoidable debt include the following:
Medical Expenses and ill health. (At least have a functional medical aid to assist).
Loss of a breadwinner. (It is encouraged to have a number of streams of revenue to cushion you in times of such demands).
Divorce or separation. (It is encouraged to have a number of streams of revenue to cushion you in times of such demands)
Sudden salary cuts. (Where possible, have at least a three months reserve to assist you in the blackout phase).
Inflation and interest rate increase. (Try to invest in non-monetary assets when the economy is still stable)

While circumstances differ; but in general, you are encouraged to avoid debt at all costs. Whether it is good debt, bad debt, avoidable debt or unavoidable debt; it still carries with it a heavy burden of managing it. It is my fervent prayer that you live a debt-free life!

Tapiwa Zuze

Understanding Debt – Its Necessity or Luxury; and Consequences (Part 2 of 2)

ADVERT HERE

Contact Form

Name

Email *

Message *