The one thing that, more than any other, makes anyone's financial plans go badly awry is debt. As long as you have debt, you will not be able to build up wealth.
You must make debt repayment a priority.
This is not to say you should not borrow money at all. There is some good debt. If you borrow money to buy what is called an appreciating asset, which you can normally expect to go up in value, you can strengthen your financial position.
An appreciating asset is any asset which gains value while you own it.
Make debt repayment a priority A home is a good example of an appreciating asset. Most homes, over time, improve in value. You would have to spend many years saving and paying rent before you would be able to buy a home of your own or a property for cash.
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The only option is to borrow money. But you should repay the debt as quickly as possible.
Avoid borrowing to buy any asset that depreciates in value. This applies to such things as furniture and even to motor vehicles.
Interest charged on depreciating assets such as hire purchase on furniture tends to be much higher than interest charged on appreciating assets like a home loan.
The very worst type of debt is money you borrow to buy things you consume, like food, clothes or entertainment.
These are things that have little or no resale value. If you are borrowing to pay for things you consume, you are in serious financial trouble.
Many people do not realise they are borrowing to pay for what they consume when they use a store card, a credit card or even a shop account and do not pay back all the money owed every month.
After a month, in most cases, you will be paying interest on an outstanding balance. Once you have to pay interest or cannot pay an account in one month, this is debt.
Often the problem with debt is that it is just too easy to borrow.
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