How to avoid over-indebtedness? - Personal Finance

How to avoid over-indebtedness? – Personal Finance – Economics

Mitchell G. Patton3 years ago

Debts are a headache and much more if you reach the top of these. So much so that he can no longer answer for them and neither for his other financial commitments.

This is how the lack of control over your expenses can become a real threat to follow the course of your life. However, through the financial educationYou can not only avoid over-indebtedness, but also You will learn to create limits with your money without imposing your dreams and goals.

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What is over-indebtedness?

The term that is chosen when receiving a loan directly influences the value that will be paid each month.

According to Tian Rodríguez, financial educator and content creator, over-indebtedness occurs when “a person, for different reasons, especially a lack of financial education and indiscipline in spending, you reach a point where it is practically impossible to pay your financial debt commitments and cover your monthly living expenses“.

This brings serious consequences to people’s lives, both financially and in their physical and mental health, such as, “bank reports, embargoes and others, but it can also bring emotional consequences such as lower back injuries, family fights“, says Rodriguez.

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Are there ‘good’ and ‘bad’ debts?

The financial educator explains that the easiest way to define whether a debt is “bad” or “good” is when, in the first of these, the person with his own effort he pays the debthowever, the second case occurs when an asset pays the debt for youAn example could be taking on debt to buy a property and having the rent pay the debt, the costs and the money left over.

This is how Rodríguez points out that the payment capacity in terms of debt should be of 35 percent of income, where the ideal a is at 25 percent.

These are the recommendations

This expert assures that “the biggest recommendation that I could give to people on this subject is to educate themselves financially. When you acquire relevant information on personal financesYour decisions will be much more accurate and, in addition, you will know how to use debt in your favor, pay debts faster, produce more money.among other”.

Rodríguez affirms that it is important to try to do not extend debts for a long times and a faster way to pay could be “paying a capital even if it is only 20,000 pesos a month, since this can mean millions of pesos in savings, especially if it is done in the first years of the debt”.

Finally, the expert assures that it is advisable to take into account the cost benefit, since sometimes it is better to invest than to pay many debts, “for example, if your debt is at 9 percent ea, but a CDT pays you 12% ea, it is better open a CDT, because it is 3 percent above your debt”.