There’s an old joke that the only certainties in this world are death and taxes, but in this day and age, we could probably add debt to the list since most of us will have it at some point in our lives. With that in mind, here are four basic lessons about debt which could act as useful guidelines in 2019 and beyond.
You need debt to get a credit score
Rightly or wrongly, having a good credit score can be a huge benefit in modern life. It may be a requirement for certain fields of employment and even if you have no intention of going into any field where an employer would check your credit record, you may need to give proof of your credit history to be accepted for a rental property and it will certainly be analysed if you apply for a mortgage. Even if none of these situations are relevant to you, there are many other reasons why your credit record might be checked, for example if you want any sort of contract such as a mobile phone contract or a gym contract. Ironically, the only way to build up a good credit history is to take out debt and use it responsibly, so you generally want to start doing this as soon as you can.
Managing money is about balancing the now with the future
If you spend all your money in the now, then you may find yourself wishing later that you’d thought to put some aside for your future. On the other hand, if you focus on putting every last spare penny aside for your future, you may find yourself missing out on experiencing life in the now. Striking the correct balance between these extremes is a path every individual has to navigate for themselves but there is one question everyone should ask when taking financial decisions and that is “what impact will this have on future me?”. By asking yourself this question, you will be reminding yourself that debt has a price and that you need to be happy that the price is worth paying.
Be very careful about accepting special offers
Sometimes a special offer really can be great value, but sometimes they can just be a way to induce you to spend money on something you neither really need nor really want. This is bad enough when it relates to small purchases, but it can become a serious issue when it relates to special offers on debt, such as interest-free periods on balance transfers. These certainly have their uses, for example, if there is a purchase you need to make anyway, then it may make complete sense to do so via a special offer if it saves you some money. The danger comes if you find yourself tempted to use special offers to justify buying something you don’t really need (or really want) because you have the option to do so at a lower cost than you would otherwise have paid.and/or find yourself unable to pay off the debt during the period of the offer and hence wind up paying more than you anticipated.
Never underestimate the value of appropriate insurance cover
Even if you are in full, paid employment and eligible both for work-related benefits and state benefits, you might want to have a serious think about what you really value in your life (both practically and emotionally) and double-check that you have appropriate insurance cover for it. For example, if you are in a family where one person works and the other is a home-maker then it can often make a great deal of sense to ensure that the home-maker is also fully insured for risks to their health and their life as they are still providing value to the family even if they are not, technically, generating an income.