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Monday, May 25, 2009

Managing Debt - Part 1

How do you deal with debt? How do you pay the monthly credit card charges, minimum amount or full amount? What is the best way to reduce debt?

Before we go into reducing debt, we have to understand what are debts. Debt means we are using future money now, in one way, we are killing inflation, if properly utilize this tool, but without proper planning, the interest alone will be enough to kill us before we manage to hedge the inflation. Thus, to fully utilize debt as a tool for us to increase our net worth and in another way, making money for us, one must have very strong discipline in the debt repayment.

There are some debt which actually favors us, while some will get us deeper in the world of debt. Good debts are like property loan whereby the property will have value in the long run and credit card although it can be damaging, if not used properly. Bad debts are like getting personal loan or charge credit cards just to buy electronic gadgets to show off.

Guess, I'll stop at the introduction of the debts. Moving forward, and from time to time, I will continue to blog more on this issue as Financial Management is also about managing debt.

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