Debt and Credit

Credit is used to make purchases that an individual cannot afford  under normal circumstance.

Credit is also a source of stress for many households, especially families with growing kids.

There are people who make $50 000 net income but owe $60 000 in credit card debt. On the opposite side, there are people with a net income of $50 000 who has little or no debt and a savings portfolio of over $30 000.

Having 4 or 5 credit cards including lines of credits at every bank could get anyone into debt easily. In my opinion, 4 to 5 credit cards are excessive.

Let’s keep in mind that one of the bank’s main source of revenue is through credit cards, loans and lines of credit.

The bank employees also have sales targets allotted to them. Therefore, when you go to the bank for a savings plan and you are presented with a pre-approved credit facility, stop and think before you say yes. Do you need another credit card or line of credit?  The risk of using credit is higher when you have access to it. Therefore, only accept what you need and say no to extra credit

A few pieces of advice I can offer, based on experience are:

·         Keep only 2 credit cards, one with high limits for your big purchases such as travel or vacation and the other with just a $500 limit as a backup

·         Keep one line of credit open at all times, remember anything more than one is generally considered excessive

Keep this in mind, if you need to use a credit card for a purchase it usually means you cannot afford it. If you have reached the point where you are using your credit card to supplement your income, you could be put into a situation that could result in a level of financial and mental stress.

Please send me an email or give me a call to discuss options that can help you with the situation.

Why do two people with the same income, assuming that their life stages are the same.

One has a very high debt ratio while the other has a high net worth. Is this the difference between a spender and a saver?

Feel free to email me directly at margmortgages@gmail.com or call 780-901-8060 with all your personal finance questions.