FINANCIAL FOCUS

Debt

     Do I have good debt or bad debt? Personal debt can make or break an individual’s financial well-being throughout their entire life. Learning how to differentiate between “good debt” and “bad debt” is essential. “Bad” debt can at best hinder progress, and at worst destroy one’s financial future, while “good” debt can create wealth if handled correctly.  

     Generally, the worst types of debt to incur is through credit cards and/or the purchase of an expensive vehicle that you do not need. Credit card debt is currently at an all-time high, around $1.7 TRILLION in the U.S., and does not appear to be slowing any time soon.                                                                                                   

      Credit cards are normally the single worst type of debt, as they have massive interest rates attached, usually variable in nature, which automatically increases whenever the prime interest rate is raised by the Federal Reserve (which has now occurred multiple times since the beginning of 2022). Many young adults are given unfavorable rates to begin with, as they have not developed a credit history and/or favorable rating, and are considered “high-risk.” It is very easy to become buried in credit card debt, and some credit card companies have been accused of “preying” on the younger crowd. The payback system is designed for “minimum” payments each month, which may build credit, but also results in additional interest paid for each item purchased. 

     “Binge spending” often results from human emotion, like many things in life. For example, when one is sad, they may buy an expensive (but very unnecessary) item to “lift their spirits,” or because they claim they “deserve it.” They convince themselves they will pay it back later, but often never do, or end up paying a lot more when interest is added. This snowballs into higher “bad” debt, and limits both buying power and loan acceptance/limits in the future.

     Motor vehicles depreciate the moment they are driven off the lot, and although they are often a necessity, one should stay within their means when purchasing, and refrain from “showing off.” Unless the loan secured vehicle is used for an expanding business (to generate revenue), or a tax write-off, they are mostly “bad” debt. Remember that you are obligated to pay for the vehicle itself, the interest on the loan, insurance, repairs, and gasoline. Often, by the time payments are complete, the vehicle is worth little to nothing. Motor vehicles need to be reliable of course, but are not an asset, other than a means of transportation.

     Student loan debt can be considered both “good,” and “bad,” as it may be necessary to gain education that later results in a higher paying job, but may also delay or prevent the borrower from other purchases, like a home.

     The “best” debt has generally been considered a loan for an income producing property, as appreciation over time, combined with rental income, would produce favorable cash flow, and return on investment (ROI). Thus, the money borrowed would produce more money, rather than be wasted in a non-asset. In the current real estate market, however, one must be cautious as the recent pandemic resulted in policies that “froze” rent payments, and changed some regulations, which hurt landlords financially.

     As you would imagine, one solution is to avoid having your credit extended to just “create” more spendable money. The current debt crisis in the United States is a perfect example. The present debt balance is over $34 TRILLION!!, and the DAILY interest payments equal about $1.5 billion!  When it starts to snowball, it is very tough to stop!

     Be disciplined, have a plan, and follow it. Do not give in to the “hype,” and do not over-extend yourself. Weigh all your options and consult with a financial literacy expert. Consider visiting the website www.Becauseyourmoneymatters.com, and connect with a professional.

     For other ROI tips, and up-to-date news, including real estate, visit our BLOG section here on ASTRO-FIN, where we provide periodic updates.

     Also, in the world of Financial Astrology, there are cycles and planetary transits that relate to spending habits as well. Understanding your own charts and personality traits can assist in your financial decision making.

     Why do I spend so carelessly? Would I be a good business owner? Can I be responsible with my money? Where are my financial strengths and weaknesses?

     Contact experienced Astrologer Ophilia Luna for a personal reading and you will be amazed at what your chart can tell you!

     Visit www.astrophiliaastrology.com to learn more – and receive a FREE birth chart!