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Use of debts to meet day to day family expenses is clear indication that something is fundamentally wrong in one’s financial planning. This is what most personal financial experts opine. Your basic expenses should always be met out of your income. One must use monthly income or savings, which is merely stored income, to meet these expenses.
To manage these expenses out of borrowed money is a clear indication that you are either not earning enough or spending far beyond what you can afford with your current income. This is often cited as the best way to judge whether an expense is essential or on. If you have to borrow money to meet a particular expense, it should result in creation of some value which will prove beneficial in the long run.
Borrowing money to buy a house makes sense because the loan that you take creates value in the form of an asset. We have many companies like Plain Green Loans, which offer attractive interest rates on housing loans. On the other hand, borrowing money to eat out in a hotel offers no significant benefit.
When times are good, one must follow this rule as far as accumulation of debts is concerned. However, one must change the rule when financial condition is not secure. Going in for debts to manage your family expenses is justifiable provided it is strictly short term phenomenon.
If you are confident of getting a good paying job within a span of six months, using a combination of credit card, personal loans and loans from relatives to increase your savings can prove beneficial. However, this is a very dangerous approach and one must be very disciplined with such a plan.
