At Super-Advice we are about all things financial, but more importantly, helping people understand so they can get ahead financially.
In a world filled with enticing credit offers and seemingly endless opportunities to borrow money, it’s crucial to exercise caution and prudence when considering taking on debt. While there are instances where borrowing can be a strategic financial move, such as purchasing a house.It’s wise to tread very lightly when contemplating loans for other purposes.
Here are some compelling reasons why you should avoid borrowing money for anything but a home.
Interest costs can spiral out of control
One of the most significant drawbacks of borrowing money is the interest you’ll have to repay on top of the principal amount that you originally borrowed. For non essential items like holidays, gadgets, new TV, fancy new couch or lounge suite, these interest costs can quickly add up, putting you in a precarious financial position, running out of money.
When you borrow only for a house, which is typically a long term investment, it minimises the impact of interest.
There’s high risks for impulse spending
Borrowing money for non essential items can tempt you into making impulse purchases that you will probably regret later. Without the cushion of your hard earned savings, it’s easier to fall into the trap of buying things you don’t truly need, jeopardising your financial stability.
I mean, if you can afford the repayments, it doesn’t mean you can afford the item.
There’s limits to your financial flexibility, of course.
Debt commitments tie up your income, and it limits your financial flexibility. Borrowing for a house can provide stability through home ownership. You need a home.
While borrowing for other purposes may hinder your ability to adapt for unforeseen financial challenges. If you tie up in payments, you haven’t got spare money, it’s hard to save, you’ve got no emergency fund or back up.
There’s the emotional toll and the stress
Debt can have a significant emotional toll. The stress of managing multiple loan payments and the weight of debt can really negatively impact your mental health.
Focusing on paying one substantial debt for a house, however, is generally less emotionally taxing.
There’s opportunity cost
Every dollar spent on repaying non essential loans is a dollar you can’t invest elsewhere. Avoiding unnecessary borrowing allows you to allocate your funds to investments that can generate returns such as money for retirement, you can also build a stock portfolio, or you can put money away for your kids’ education.
Reduced savings for emergencies
In times of unexpected hardship, having substantial debt can be a heavy burden, man. By reserving borrowing for essential assets, like a home, you’re more likely to have a safety net of savings. And that’s what we, that’s what we teach. Get your safety net and you can rely on that during emergencies.
Borrowing money should be a carefully considered decision
Primarily reserved for essential investments like purchasing a house. Avoiding debts for non essential purchases not only safeguards your financial well being, but it also allows you to build a secure and stable future, free from the shackles, man, of unnecessary financial obligations.
That’s a wrap
Remember, financial freedom and peace of mind often come from living within your means and making prudent financial choices. When you allocate all of your income to payments for non essential items, you are putting immense strain on yourself and it’ll stay there until the debt’s paid off. So don’t even start.
If you need any financial help or advice please get in touch with us at Super-Advice.
