After setting your financial goals and setting your budget, keeping debt under control is paramount. Many Brazilians are indebtedly in debt, either for lack of financial education or for falling out of the easy credit trap.
Some data from the Puriest Save Bank make clear our debt level:
- More than 15 million bank customers have debt over $ 5,000.00, 47% higher than the one measured in December 2005 and 13.6% higher than the mark achieved in 2006;
- There are 80 million customers with some debt, however small;
- Each consumer has, on average, 3 different debts (car, home and loan);
- The use of credit card revolving (non-payment of full invoice) grew 30.4% in 2007, behind only payroll-deductible loans (growth of 31.9%);
- The debt of individuals with banks totals $ 442.4 billion. Of this total, 33% ($ 146 billion) mature within 180 days and 16.8% ($ 74.7 billion) mature within 360 days.
Because of this, it is worth knowing more about debt and stay on top of some tips and concepts:
Some debts are good
Financing your home or car may be worthwhile in order to reach a goal faster, because these debts usually have the lowest interest rates. However, be sure not to commit to a performance above what you can actually afford because of other expenses related to these assets. We already wrote about how much it costs to have a car, for example. Also search for the best rates in the market. The Puriest Save Bank has just launched a service where it is possible to compare interest on the main types of credit, such as overdraft, personal credit, purchase of vehicles and goods.
Some Debts Are Bad
Avoid using a credit card to pay for things you consume quickly, such as vacation travel. This is usually the fastest and most efficient way to get into debt. Instead, set aside some money each month so you can pay cash for expenses like these. As we have already said in setting financial goals, when there is something you want very much but costly, save for some time (weeks or months) to make that expense and thus avoid the high fees charged by credit card companies.
Prioritize the payment of the most expensive debts
The key to getting rid of debt is to pay off debt at the highest interest rate, such as a credit card or overdraft, and pay the minimum allowance for other debts. Once the most expensive debt is paid off, move on to the next higher debt and so on.
Do not fall into the trap of the minimum installment
When you only pay the minimum amount on your credit card statement, you are paying only the interest amount for that month, not paying off any of your debt. It will take years to completely repay the debt and most likely you will end up paying much more than the debt value.
Notice where you are borrowing
When you are disciplined, it is often better to borrow from yourself, that is, from the money you invest, because most of the time, the yield on your investments is much lower than the interest charged on market finance. However, this can be very dangerous if you do not do it in an organized manner. It can compromise your long term goals such as buying some good or even your retirement.
Wait for the unexpected
Build a security savings, with enough to keep your family for three to six months in case of an emergency. If you do not have an emergency fund, an unforeseen event such as a broken down car or apartment problems can seriously damage your finances.
Do not hurry to pay off some debts
Don’t compromise your reserves with low-interest debt, such as real estate or automobiles, especially if you have other debts. Remember to prioritize the most expensive debts, not the longest ones.
Seek help as soon as you need it
If you have more debt than you think you can afford, get help before those debts break you. There are consumer protection agencies or even banks that can consolidate their debt and help them better manage their finances. There is also a lot of free information on the internet that can help you. But be aware because there are also a lot of people wanting to take advantage of people in desperate situations.