boon or bane - The Credit Story

1) The ability to build saving helps you to build HIGH SELF NET-WORTH

2) Identify areas to cut for more savings

-bills (water/ electricity/ petrol/ mobile phone)

-credit cards

-hire purchase loans (interest rate advertised = fixed, no rest basis)

*Rule of thumb, to obtain the True Effective Annual rate, you need to Double the advertised rate and add one to it*

3) The discipline to save can check overspending in other areas. Always keep the ultimate financial goal in mind in order to avoid being swayed by temptation and overspending on the little things.

4) Understand the difference between the need and wants

5) Wise credit management falls on fundamental, knows the difference between a good debt and bad debt.

6) Principle of sound utilisation of credit remains the same, if debt is used to fund consumptive behaviour it will destroy lives ie credit crisis 08

7) If debt is used to build a business or buy appreciating assets it can be a heaven sent boon

8) It it not wise to get into a debt situation over a depreciating asset

9) Identify what is assset and what is liabilities

10) If people is aware of the charges they are paying they would be more careful about the credit they are taking on.

Reference:-

1) Personal Money issue #49 September 2005.

Notes:-

1) if you can hardly get by because you own two or three cars, that's bad. If you can hardly get by because you own three houses, you can always sell off one house.

2) for credit card holders, identify the purpose of your card and stay focused. If its for payment purposes so that you dont have to carry so much cash around, that's fine.

3) Credit card could also be used for emergencies