Saturday 30 June 2007

Debt Help

The most common problem facing people wanting to build up their wealth is debt. Debt is a funny old thing, a bit like food. Many people start out accumulating "bad" debt for consumer items such as cars, living expenses or holidays which don't provide any boost to your net wealth. This debt is a bit like eating chocolate cake or icecream - it gives instant gratification, and is OK in small doses, but can easily get out of hand and be bad for your health (or wealth).

There can also be "OK" debt accumulated in the early years, used to finance an education or buy a business suit. While the interest on this debt is a drain on your finances, at least the money has gone towards something that will (hopefully) increase you earning potential and provide increased income in the future. This is a bit like eating your fruit and vegies each day - it isn't always great fun, but it's good for you.

The third type of debt is "good" debt, where the debt is used to make an investment with a overall ROI greater than the interest costs. While you can increase you net worth simply by paying off all your debts and then saving to invest, it's usuaully a worthwhile strategy to make use of other people's money to invest. For example, borrowing money from a bank to buy a rental property, margin loans to increase the size and diversification of your stock portfolio, borrowing to grow your business. Of course such "good" debt can easily turn "bad" if the investment doesn't work out, or you take on too much risk and can't survive the inevitable ups and downs of investing.

If you have debt to eliminate there are many strategies that can be employed. has information about online debt consolidation which will inform you about such things as student loan consolidations, debt counseling services, home equity loan and so forth. Each of these techniques can be useful in specific situations, but many of them can also be dangerous if used carelessly or aren't suited to your personality. For example, debt consolidation can provide relief from multiple creditors and simplifies your multiple payments into a single payment. And it can often save some interest cost by getting a rate on the consolidated debt that is lower than some of your individual CC debts. However, the can be traps with high fees and charges. Also, some people will use debt consolidation or a home equity loan to pay off their CC debt, but then rack up more charges on their CCs and end up in a worse situation as before.

Anyhow, has a large amount of useful information on the site, just be careful to shop around and compare the costs of any debt solution you consider undertaking.

Copyright Enough Wealth 2007

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