The good side of debt – using debt to achieve your financial goals
Debt is often seen as a scary word, but did you know that not all debt is created equal? Most people say debt is for the booming economies and our society has often shed debt as a grim thing that will destroy your life. However, it is important to look at debt as a financial relief as opposed to something that destroys your life.
Good Debt vs Bad Debt
Good Debt: Good debt is an investment in your future. It's a tool that helps you build wealth or improve your financial situation over time. Here are some examples:
- Mortgage: Buying a home is a long-term investment that can appreciate value and provide stability for you and your family. NMB Properties offers mortgages with flexible payment terms. It is important to note that when considering getting a mortgage apply at a reputable institution. There are a lot of real estate companies that have absurd payment plans which are impossible to pay. This will result in loss of property or straining your financial budget.
- Business Loans: Starting or expanding a business can be a smart move, creating income and financial independence. Especially in a developing economy like Zimbabwe business loans are an important part of working capital. Businesses in agriculture, supply and logistics, real estate, and construction only to mention a few need loans to sustain and grow their business. Here at NMB Bank, we offer various loans including operational loans, capital loans, and international payments.
- Education Loans: Investing in your education can lead to better job opportunities and higher earning potential. It's an investment in yourself! Education loans are not big in Zimbabwe but if one gets an opportunity to have one, it is a great investment. Most finance institutions award these to postgraduate students who demonstrate the capability of paying back.
Bad Debt: Bad debt, on the other hand, doesn't offer long-term benefits and can negatively impact your financial health. It's important to avoid or minimize this type of debt. Here are some examples:
- Credit Card Debt: High-interest rates can quickly accumulate, making it challenging to repay. Avoid carrying balances whenever possible. Fortunately, Zimbabwe has a few credit card givers, and if they do it is after taking into account the credit risk. If you happen to have a credit account it is imperative to have financial control.
- Impulsive Purchases: Buying things you don't need or can't afford with borrowed money is a recipe for financial stress and regret. One needs control on their impulse and to resist the urge to buy unnecessary things. This is where a budget list comes to play. We advise also identifying and separating needs and wants.
- Gambling: Gambling is one of the leading causes to irreversible debts and it has destroyed many people’s lives. What might seem like harmless games and entertainment can lead to destruction and addiction.
Remember, being mindful of your debt choices is crucial. Assess whether it's an investment in your future or a temporary pleasure that might lead to long-term pain. Prioritize good debt and work towards eliminating bad debt to secure your financial well-being.
Let's make informed decisions about our finances and use debt as a tool for success, not a burden!