When we are dealing with debt, we often need to work with some kind of instalment plan. The plan is used for all kinds of purposes, such as mortgage, credit card repayment, car loan and others. Instalment plans have tight correlations with our personal budget. In this case, our monthly budget will always contain instalment payments as part of the expense components. If we are dealing with large purchases, paying debts over a specific period of time is the only way to allow us to achieve that. Mortgage is a fundamental step of acquiring property as part of our asset portfolio. This should be an ideal way for us to slowly and steadily accumulate wealth.

Repayment plan can also be used for clothing, groceries and other consumer-based items, although debt shouldn’t be used for these kinds of things. Because of it’s easy to purchase these items, we can be more eager to spend money of these things and this may not be the best thing. Borrowing money has been made so much easier and it’s not a good thing. Things can be made worse if we pay only the minimum amount due. It means that we will be affected by the full force of interest rate. The reduction of the principal will be quite minimal and it’s not a good thing, because the debt will stay with us for nearly forever.

The bank sales staff could also be tricky by persuading us to upgrade the basic, bronze credit card into the premium, gold variant. They could entice us with the prospect of so many benefits. However, it means that there’s a larger or even unlimited limit in the usage of credit cards. It means that gold credit cards can be both powerful and dangerous. If we are trapped and use it without careful consideration, we will be subjected to a huge loan that has very high interest rate. It is clearly something that everyone wants to avoid in any situation. When we have become a model customers, the credit card provider could even assign multiple marketing staff to persuade us, we shouldn’t fall to this kind of trick.

In general, we should avoid buying anything that’s beyond our financial capability. Before we know it, we could end up becoming someone who has huge debt burden and it’s something that we need to avoid. One of the worst indicators is that if all of our credit cards have been maxed out and we barely have enough financial capabilities to repay those. In this situation, we need to start having a proper repayment plan and it often includes drastic reduction in our spending. We should have proper instalment plan that can bring us to a debt-free situation. This is an essential step to have the financial health. A good financial strategy is often about having a sensible repayment plan. Debt is unavoidable in modern life and it is important that we are able to manage it well.

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