If any of the following are applicable to you, please be careful. These are the early signs that you are carrying excessive levels of debt.:
- You are charging food or petrol expenses on you credit card because you have no cash available;
- You are close to the limit or over the limit on your credit cards;
- You only pay the minimum balance on your credit cards each month;
- It seems that the only way you can afford to pay your living expenses is by increasing the limit on your credit card;You do not know the amount you owe to your creditors;
- It seems like you have too many credit cards to handle and too many payments;
You have considered bankruptcy as a way out of your situation
If more than 1 of the above points describe your life, please stop and seek financial assistance. Excessive debt left unchecked can have dire consequences for your credit history and ability to borrow in the future.
There is a lot of talk in the media about the levels of debt Aussies carry on average and how that debt has grown over the past decade. This information must be digested in conjunction with debt definition. Not all debt is the same!
Bad Debt
The debt you want to stay away from is known as Bad Debt. That is your credit card debt, unsecured loans, store cards, car loans – ie. any debt that is not related to a growth asset, rather related to a lifestyle expense. By borrowing for lifestyle expenses and not repaying these ASAP you will find that yourfurniture which cost $2000 to buy, costs you $4,000 by the time you pay it off, but is worth $400 by that stage.
Good Debt
These are your mortgages over real estate assets. While your investment mortgage and your home loan are also debts which end up costing you several times the initial loan by the time they are paid off, they relate to growth assets. This means that you enjoy the benefit of asset growth which in most cases is greater than the Home Loan cost.