Thursday, February 23, 2012, AM | Leave Comment
We all know but some folks may not realize that debt is a financial obligation that must be met and satisfied. Consumer debt includes credit card debt, charge accounts, auto loans, and home equity loans. On these pages, first mortgage loans on one’s home are always considered good debt and is not considered consumer debt per say.
Now in order to be able to invest your surplus fund if any, you ought to first pay off your consumer debt. The reason is quite simple.
When you invest, there is no surety – no guarantee – that you will appreciate your funds in value whereas consumer debt has settled interest rate – sometimes more than you had anticipated – that you are obligated to pay besides your principal.
You need to research your investment strategy and once choose one you need to follow it through for at least one full year. I think it’s unwise to take on the risks that come with investing unless you have the financial staying power.
Take steps to be debt-free
There are quite a few advantages when you start traversing on the path of debt-free life. The two most important ones are less financial stress and huge savings on interest expense. There are certain steps you can take to be able to eventually pay off your debt.
A workable plan is a sign of maturity
Remember if you think you are a responsible individual, then you must have a thoughtful and workable plan. Some consider it a sign of maturity.
- Goal Setting
Goal setting is the very first step you should take in your workable plan. Once you set your goals of reducing your debt obligation, you should be consistent with it. They should also be set with your spouse if married and with your financial partner and in writing.
- Self control
If you really and truly want to get rid of debt, you must have self-control. That is not very hard to do and is attainable by everyone. If you are heavily in debt, you must first put a stop to more unnecessary purchases. Be in the habit of saving before spending.
- Finance tools
If finance tools can help you in getting organized, then by all means take advantage of one that you feel comfortable with. There are finance tools on the web you can use to organize, simplify and automate your finance.
The above link leading to finance tools will help you only if you are in control of your own destiny. Self-control is more important than using any kind of personal finance tools.
- If you are weighed down by consumer debt…
Many folks who have become weighed down by debt wish they could be free of debt. However, just wishing will not satisfy your debt obligation. Nobody has a magic wand to use it. These folks must learn that the satisfaction that comes with spending is quite brief. But the pressure of making monthly payments may go on for years to come.
- Start paying off consumer debt
Now that you have set goals, have developed self-control and may or may not use finance tools, and can realize the potential stress that comes every month at the time of payments, it’s time you start paying off those credit cards, car loans, and other short-term debts. These are your moral as well as legal obligations and they must be met satisfactorily.
You need goal-setting and self-control in investing as well…
You need to have goal-setting and self-control in investing. Once you get rid of consumer debt with no more mental pressure and feel free of debt obligations, then you can start having an investment strategy for your surplus funds and be able to grow your money.
In a Nutshell
Once you start working on paying off your consumer debt and eventually succeed, then you can start investing in the markets. However, you must be consistent and stay in it for the long run. You must not panic at the first sign of the market coming down.