To have our finances healthy, it is necessary to learn to differentiate what is good and bad debt, where they will generate a negative or positive impact on our economy and monthly budget.
So that you can differentiate the types of debts and which are the most advisable to acquire we want you to recognize them.
Bad debt
The bad one arises when it is decided to acquire something that cannot be paid in cash at the time. These types of movements affect the economic health of families.
The practice of it is to spend money that does not belong to us, to pay it in the future along with interest. Carry out this practice continuously, in a short period of time you will have serious financial problems.
At no time does it come to report any benefit, beyond the consumption of the good acquired with it. It is necessary that you know that this type of debt will only serve you to acquire more expenses, that is, you will only have things that at no time will give you any economic profitability. On the contrary, the excessive use of money can make you lose financial freedom.
Examples of bad debt
- People who decide to pay their vacations using the credit card.
- When you decide to buy a TV with the latest technology at 36 installments without interest, but you must pay a commission or opening fee.
- Use the credit card to buy clothes or any other utensils that are not necessary.
Good debts
In the same way as there are bad debts we can also find good debts, although these are not very well known, so we want to explain in the best way.
The difference of a good debt is to borrow money to buy goods or make certain investments. That in the future they can report a cash flow to our pocket. It also increases wealth, because it is used to acquire long-term assets that report returns.
For being borrowed money they also involve the payment of interest or commissions. However, these are amortized by the return obtained from the investment of that money.
Examples of good debt
Take out a loan to buy a home that in the future is destined to rent. Assuming that the monthly fee to be paid is 2500 quetzales, after having acquired the house, it is rented for a fee of 3,500 quetzales. This loan obtains a return of 1000 quetzales per month, in this case where the debt is considered good.
In summary, all good that is acquired whose value may increase over time is considered good debt. On the other hand, bad debt is one where you buy products or services that will only serve you in the moment or in the future will generate expenses. Ready! We hope you can better understand how these types of debts work and thus take better care of your Financial Health.