Debt Flashcards
(9 cards)
What is debt?
Debt is borrowing money from an entity (Government, banks, people) with the intention to pay it back, usually with interest. Debt can be both irrational and rational, one can use debt strategically to improve their wealth or to invest in them selves.
Why do we get into good debt?
Financing large purchases- Buying a car or a house if you don’t have the amount upfront
Covering unexpected emergencies/ purchases- Medical bills, care repairs etc
Investing into your future- education, qualifications
What is important to consider when it comes to debt?
does the debt contribute to you building assets or growth of wealth?
Does the debt generate long term benefits, or is it simply a way to purchase wants?
why is debt considered bad?
Debt is very notorious for dominating and weighing down the middle class and median income earners
Debt restricts people from better jobs and investments
what does the term “dominoing your debt” mean?
Refers to a method of paying off your debt]
either start by paying off the smallest debts first, all the way to the most significant amounts
or
start by paying off the highest accumulating/ interest rate debts first
what is the purpose of a credit card?
Money borrowed using the banks money with a credit card, often has a high interest rate
what are the draw backs of owning a credit card?
Extremely high interest rates can spiral into a debt trap. Minimum payments often only cover interest, not principal. Credit cards can be very convenient but can be dangerous if used irresponsibly
what are some benefits of credit cards?
Rewards programs and protection benefits ( on some cards
Considerations when it comes to credit cards
Only use Credit cards for planned purchases you can afford to repay full each month. Avoid cash advance and late fees’
Credit Card Loans/debt are known to dominate and cause stress for the average individual and family in Australia
