Borrowing money has consequences. Before you go ahead and sign up to a loan or credit card, you really should spend the time and work out whether or not you need to borrow the money. It might actually be better for you to pay back the money you have already borrowed, rather than getting into more debt.
The most important questions to ask before borrowing money
- Do you really need to spend money?
- Can you do without the purchase?
- Can you afford to pay back the money you borrow?
- Do you have other options available to fund the purchase?
Do you really need to spend money?
A lot of people don't even stop to consider whether they really need the money, let alone whether they can afford to repay borrowed money, or do without the purchase in the first place.
Before you commit to borrowing money, you should look at all your options, and all the consequences of borrowing the money. You should ask your self the following questions:
- How important is the thing that I want to buy? Is it essential?
- Can I do without the item I want to buy
- Can I do without borrowing the money?
- What will happen if I borrow the money, and what will happen if I don't borrow the money?
- If I really need something, is there another way to to get it, such as swapping something, or selling something first, or even saving up?
Doing without the purchase
You should get into the habit of grading how important something is before determining whether or not you should borrow money to buy it.
Saving Up first.
More often than not, unless the item is significantly important, or an absolute necessity, you can probably do without it. It would be better to live within your means and save a little each month, rather than getting yourself in to debt.
There is rarely something which you need so desperately that you should borrow to buy it. It would be better to save up first so that you can afford to buy whatever it is you want to purchase. Getting credit to buy the latest fashion item is probably not a good enough reason to borrow money (unless it is on 0% finance in which case you won't be paying back any interest).