7 3 Borrowing There’s an important distinction to make when it comes to borrowing between long-term, lower-cost secure debt (like mortgages), and short-term, high-cost unsecured debt (like credit cards). The former can be useful to help you during your life, but the latter can be dangerous if you don’t keep it strictly under control. What you have to understand is that taking on too much debt can hurt your financial future. Repaying debt enables flexibility and choice in your financial life. The idea of saving up for something new appears to have disappeared because everything is available now. So-called interest-free credit deals are misleading as the cost of the credit has typically been rolled into the cost of the goods you are paying for over 24 months, for instance. It’s this kind of debt that’s expensive, and it’s this kind of debt that you want to avoid much more so than long- term, lower-cost, secure debt, like mortgages. If you have debt, your wealth plan needs a strategy to repay it. 13 Jonathan M. Gibson CFP™, Chartered Fellow (Financial Planning) www.wellsgibson.uk
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