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THEME #4: MANAGING DEBT Establishing good credit is important for your financial future. When used properly, credit allows you to make larger purchases in the future, such as a car or securing a mortgage for a home. Spending should coincide with your budget, and you should only spend based on what you can afford to pay back in a relatively short amount of time. It takes discipline to borrow and manage debt responsibly. Knowing how much credit you should have and how to manage it isn’t always easy or intuitive. There are some key principles of credit that will help you whether you’re managing your own debt or trying to teach your children about debt and how to manage it. The first thing to remember is that buying on credit can be expensive. Whenever you buy on credit, interest and other borrowing fees can increase the cost of whatever you’re buying. Another thing to remember is that credit makes it much easier to spend beyond your means. Being an irresponsible borrower can hurt your credit history. As a responsible borrower, you make payments each month, make payments on time and only use credit when you know you’ve got the money to pay back the lender. If you have a history of being late or missing payments, lenders – like banks or car dealerships – can turn down your request for credit. Borrow responsibly to make sure that credit will be there when you need it. Looking for a way to teach your children about the concept of borrowing? Next time they ask to borrow money to pay for something they want, charge them interest and set up a payment schedule. Make sure they understand the importance of sticking to the payment agreements, and let them know that you will only be able to lend to them again if they make their payments on time! If you’re learning about credit for the first time, the following page has some helpful tips.


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