Some savings or investment decisions require reflection but you should not have any doubts about unnecessary loans. If you decide to take a loan to repay debts, current cravings or finance a purchase that is only seemingly “indispensable” then you will most likely regret it. Also almost certainly you will lose out on it. So read in my post when you should consider to borrow money and when better avoid it!
When it MIGHT be a GOOD idea to borrow money
An exception is mortgage and investment loans. Especially if we talk about a large own contribution and relatively short time. Also special circumstances like a growing family. Although there are also solutions at that time. As for investment loans, if your company is very likely due to a quick injection of cash to develop, then this solution has the most sense and justification.
When it WILL be a BAD idea to borrow money
- Any consumer loans – it does not matter if you repay them within a month or – even worse – you forget about them for a while, because you will not have to pay them back. Buying a new TV, buying a new console, buying a new car etc. etc. everything that is new, comes straight from the electronics shop in absolutely the vast majority of cases is not an opportunity, only an incentive for you to spend much more money than these products are worth.
- Loans taken to repay other loans. If you have a problem with the repayment of the loan, it is the worst scenario that you can afford. NEVER go to a bank or credit point for another loan. Ask for overtime, look for a new job, borrow money from a close family member, think about what you can sell to earn some cash (such a stalemate situation can be very motivating!), But never ever take credit for paying off another loan.
- Investing in risky financial instruments when you are in debt. Man in stressful situations behaves irrationally, and investing on the stock market, for example, is stressful in itself, as you may have already seen if you have / have a brokerage account. If we want to pay off the loan with such investments, we will not be able to withstand the pressure of the falling share price and sell it at the worst possible moment even further away from debt repayment.
How to stop yourself from “borrow money” urge?
I warmly encourage you to:
- left the store without buying on impulse and think if this product is indeed worth the price
- if you already want to buy a given product, be patient and do not buy in the shop where you saw it, just take a look at the price comparison engine, for example Ceneo.pl
- if nothing really can stop you from buying, because you dream about a given product – try to find a used copy on Allegro.pl. Everything that is new after passing through the cash register automatically loses a minimum of 20-30% of the value! Is lightly used or almost unused (eg a failed gift) not happy you the same? Think about how much money will be left in your wallet, and it will gently bring you closer to the goal, that is, to have a million in your account.
Do not live on credit! It’s a choice, not a necessity!
I hope that you will take my advice to heart and you will be very cautious about consumption based on loans. Maybe even thanks to this post you will stop yourself from buying too much? Remember that the economic crisis in 2008 was mainly due to overdistributed loans. However, this is another story, but interesting and very informative. If you have not watched the great movie Big Short, you should do it straight away!
Please keep on mind that I’m NOT a financial adviser and you shouldn’t treat above post as any kind of financial advice. This is just my blog where I share my knowledge but I can be wrong while doing so! Also please remember that any financial decision you will make might affect your finances either positively or negatively. Your capital is always at risk when you invest. You should always read T&C (Terms and Conditions) to make sure you know all the rules.