What is debt? Debt is simply the use of other people's money. At this point even inspite of our modern age perhaps most of us if not all have been in debt at some point in their life or may still be in debt which is something that most of us doesn't want to be. But in this fast paced life, it seems to be impossible not to unless you're born with a silver spoon. May it be with borrowing from a friend or relative, from financial insitutions, ending company, and the famous of them all which is credit card.
I had a great chance of getting in depth topic about debt with one of the sessions from Sun Life's Finance and Investment Coach Aya Laraya who is know for his Pesos and Sense a Certified Securities Representative, a Certified Investment Company Representative, a Realtor, a writer and a writer with an MBA and have 25 years of experience in the financial and investment industry, I've learned that dept is not that bad after all, and there is such a thing as a good debt, but before we go into that let me share some bullet points about debt.
Before going into debt we should consider about the following:
- Whyu are you borrowing money?
- do you HAVE to borrow money?
- Have you considered other options?
Now after asking those questions, let me also share to you what may be considered as good dept that was shared in the session.
1. Business, for obvious reasons it generates income
2. Home, especially if it will be appartments or condo's that can be rented
3. Car, can be use for personal and you can have it rented/hired, ex. uber
4. Anything that can generate / enhance revenue, samples of these are investments on stocks or mutual funds and similar investment ventures
In summary, all of the above points can somehow return whatever you owe and generate excess which is considered as income.
Coach Aya even sited examples of companies that where actually getting into debt to grow their business and he also sited facts on why those companies engage into such.
For businesses they expand by using the methods like growing internally, wherein they depend on the company profit in order to grow their business, another way is by borrowing money from banks to fund and expand the business especially if the company profit is not enough for company improvement and lastly they list public ownership in other words offering shares of stocks to the public. We then realized that even big companies get in to debt but it is for the better.
We really have to get a better understanding about debt and study what it is and how it can help us instead of destroying our finances and getting into an even deeper debt.
Since there is good debt, definitely there is also bad debt which were meant for:
- Consumer Goods
Clearly the above points will not generate income or will not give the money back. In the process Aya also gave some recommendations and pointers that we can use in order to get out of the debt trap. We were given the questions below:
- How much debt can I have?
- How much do you REALLY owe?
- How much can you pay?
For consumer debts Aya also give out ways on getting out of debt trap. Starting from cutting up your credit card, creating a payment plan and issue cheques if possible for paying your debts.
There are most likely thousand of methods about financial planning out there specially in todays information age, but like what Aya have pointed out to us. Budgeting is personal journey and the theories and methods can be followed but it is not absolute and at the end of the day it will still be us that will decide on how we will manage our finances, the important thing is to continue learning and look out for what works for you.