While debts should really be avoided, you need to understand that there are smart ways to go about your debt decisions.

In today’s fragile economy, you really have no choice but to practice wise spending habits. Gone are the days when you can just swipe your cards for every little purchase that you want to make. You need to consider every little expense because you might suffer the consequences in the future. Every decision that you make today will affect how your life will be in the future.

Given that, you need to keep your ideal future life in mind as you make your debt decisions. Of course, your current finances will be the main qualification in terms of the type of debt that you need to make. However, that should not be your basis in terms of how much you will really borrow. For instance, if you are qualified to loan $500,000, that does not mean you should get that much. You only get what you need. That is the main premise of being smart about your debt decisions.

This way of thinking is cautious in the sense that you know how unpredictable the future is. You know that anytime, your income can be compromised and you will be left with nothing to pay off your credit obligations. You are not being a pessimist but it pays to not leave everything to chance. If you can head off a problem by not creating it in the first place, then you will be better off.

That is not to say that you will not get the loan when you need it. The bottom line is this, if you have to get it, make sure it is only the amount that you need. For instance, why buy a home that is worth a million when you and your family can live comfortably in a modest house? Even if you can afford it, that does not mean you should get the million-dollar home. Sure it will be luxurious and it will make you look rich but it will tie you to a very big loan.

Not only that, you need to start saving for any future expense that you have to make. If you want to buy a car, why not save up for it instead of getting a loan? You will enjoy your car more if you know that it is fully paid already. All the other expenses that you can pay for in cash should be done so as to eliminate those credit card debts that can accumulate quickly.

Believe it or not, debt has the power to dictate how you will live your life - and even the type of career that you have to maintain. Choose when debt is the only option and make sure you only avail of what you need - regardless if you can loan more than that amount or not. And if you can wait, it is still best to just save up for a purchase. Grow your reserve fund so you can use it when an emergency strikes.

These are actually simple concepts that most of us find hard to follow. But with a bit of determination and discipline, these smart debt decisions will keep your future self from suffering the consequences that could have been avoided in the first place.

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