A big part of building wealth is making smart choices about credit and debt. Keep your bottom line in mind — your net worth — when making your decisions.
In this lesson, you'll learn:
If you don't have a budget, or spending plan, you're not ready to take on debt. Getting a credit card does not mean you have additional income.
Before taking on credit obligations, it's important to have a good foundation that includes emergency savings, a budget, financial records and goals, and insurance to protect your assets.
When you get a loan or a credit card, you repay the principal, which is the amount borrowed, plus interest, the amount charged for lending you the money.
The interest is compounded. The interest is added to your bill, and the next month interest is charged on that amount and on the outstanding balance.
Before you borrow, learn everything about the loan, including interest rate, fees and penalties for late payment or early repayment.
Bob decided he needed to reduce his $3,000 credit card debt.
|Total monthly interest||$||47.30|
What is your credit card debt situation?
Below is your credit card debt. What is your strategy to address it?
|Total monthly interest||$||0|
This lesson covered ways that you can use credit as a tool and prevent it from reducing your net worth.
Having a strategy to manage credit and control debt will help you build personal wealth.
Another important credit decision is choosing the right loan, which you'll learn about in the next lesson.