Smart Women Stay Out of Debt

There is however, what some experts call good debt versus bad debt. Good debt is when you borrow money to invest in your future, for example, when you take out a student loan to get a better education or invest in a small business.

Most of the money that you borrow for these purposes will allow you to evolve into a professional in your field of choice and subsequently make extra money that will allow you to pay off your loans faster.

The flip side of the coin is “bad debt”. It has no long-term value. You must have now and pay later. The problem is that finding that “later” time to pay off this type of debt has proven trickier than deciphering the Da Vinci code. This debt feeds on your need for instant gratification.

The best example is of course, credit card debt. Credit card companies prey on young women like yourself who has a lot of needs and not a lot of money. One day, you will realize that you are up to your eyeball in debt and have no idea how to get out of it.

You cannot pay all your balances out because you have very little savings and not enough cash flow. So, the balances keep getting bigger and you keep getting more and more desperate.

If you are one of the few lucky ones that still has no credit card debt, don’t fall asleep in your laurels. Stay away from them and avoid them like the bubonic pest. You may want to open or keep one (and I mean only one) for emergency purchases or travel purposes but always making sure that anything you charge can be paid entirely when the next bill arrives.

For those of you who are not as lucky, here is my advice:

1. Destroy any and all smaller credit cards such as department store cards. They normally have higher interest rates than those you open from a bank. This means that, if you don’t pay the balance right away, what you buy today with the store card will end up costing you 2 or 3 times what you originally pay for.

2. Pay cash or use ATM’s or debit cards whenever you want to purchase something. This way, you are more aware of how much money you are spending a month and on what and can balance your checkbook and update your budget more efficiently.

3. Pay more than whatever the minimum payment required by the credit card company is. Otherwise it may take you decades to pay off the entire balance of the card, especially when you will be adding a few additional charges to that same card each month.

4. Whatever you do, do not neglect to pay off any bills you have every month. Credit cards or else, any bill that goes unpaid may and will damage your credit and with it, your ability to later on buy a car, a house or invest in a personal business.

5. Visit a financial institution that will give you free advice (most big financial institutions offer similar services). Study your options and make the best decision based on your current and future plans.