One excuse many people give for being in debt is that they have never been good with money. Personal finance has a lot more to do with discipline than how much money you have. There are some cases that even smart people can get into trouble with debt.
At most retail stores, you will likely be asked if you have a store credit card, or if you want to apply for one if you don’t have one. You need to consider if the discount offered is worth it in the end. If you do apply for a store credit card and charge your purchases to it, then you need to be sure to pay the bill on time. Store credit cards typically have a higher interest rates than other credit cards. If you don’t pay off your balance in full the first month or so, then you may end up paying more than you would have without the discount. If you open several cards like this, it could have an affect on your credit score. Part of your credit score is figured by taking into consideration the total amount of credit you have available and how much you have charged.
As another example of this, many people may charge more on their credit cards than they normally would to receive reward points or dividends. Again, if you are not able to pay off your balance within a month or two, you may negate the value of the rewards you received.
A home equity loan or second mortgage is one way to use the equity in your home to pay for expenses such as home improvements, college expenses and other expenses. People may get into trouble with these financial vehicles if the value of their home decreases significantly, in turn reducing the amount of equity in your home. Also, if you experience a job loss or decrease in income, you may be unable to make the additional payments on these loans.
Many purchases such as cars, electronics, furniture and appliances can be made with a certain amount down and monthly payments for a specific amount of time. You need to keep track of how much these payments add up to each month. It may be easy to spend more than you can afford to pay each month. This is because the payments may not seem very large, but a number of them do add up.
If you make purchases on a 60 or 90 days same as cash program or interest free program, make sure you pay the balance before the time period is over. If the balance is not paid in full by the end of the period, the interest that was waived will be charged from the beginning of the agreement and continue to grow until the balance is paid in full. It may seem like a good deal to get a certain amount of time of not having to make payments, but if you incur the interest payments,then you may pay many times of the original price of the items.
Even smart people can get into trouble with debt.