Most of us grew up knowing nothing about finance or money. We were even told not to look at money from childhood as it would make us start to lose focus in our education and other things. In Nigeria, every parent expect their children to study petrochemical engineering or medicine, law, or other professional courses because they aim at one thing; getting a high paying job, and having a good prefix or suffix after the name of their wards when they grow up, like Dr. John, Felix (S.A.N), Engr. Timpson and so on. I was interacting with a medical practitioner about two day ago and he was telling me that he doesn’t understand how the stock market works or its purpose and this got me shocked. A lot of people around the world do not even understand that there is a market that opens on Monday and closes on Friday which is the Stock market, so many do not know that the economy of a nation is dependent on the daily transactions and exchange of money and goods, and the stock market.
Just like a lot of people who did not know much about finance, I also had a fair share of it also but I had to learn bitterly because I wanted to be different financially and understand how money moves and what it should be used for. In this post, I will, I will not be talking all about the stock market or the economy, also, I will not be talking about getting a good job or getting a high paid job, I will be talking about DEBT
DEBT
The use of a creditors/third party money for a purpose which now makes the main party/s (debtors) become obligated to pay the creditor back at a period of time is known as debt. Debt didn’t start today, it has been existing for years. Since when human started trading one thing for another, human started getting into debt. A lot of people see debt as free money when they get it but they do not see as free money when they are paying back or when they are getting it above the inflation rate.
A lot of people want to pay for what they want with other people’s money and this is where debt comes in. Debt can be a financial problem when people have a lot of expenses and still have to solve debt problems on a regular.
Debt is good and bad
While growing up, my parents got into a lot of debts and they used this debt to fund things like cars, houses, feeding, ceremonies and so on, so while they were doing this, they made me understand that debt was a really bad thing and that they had to struggle with paying them back as they only had one source of income. I grew seeing debt as death until I saw a loan of 1% interest rate which would fetch me a profit of about 25% annually if I had used it for my business. I then saw that loans were Death and Leverage, depending on how you are using it. Not all debts are good, it becomes bad when the interest rates are extremely high, it becomes bad when they are used to get things that would not bring in profit and the source of income to pay the debt is narrow, and so on. Debt used as Leverage is a good debt while debt used to get liability is a bad debt.