Is it the right financial posture to reduce debts?

Text / Mu Yu

We often see some financial management articles. One of the main ideas is to “reduce debt, increase assets, and pursue compound interest.” If it is a very long period of time from decades, there is no big problem with such financial thinking. . However, people’s lives have been in these decades, but the types and amount of income and expenditure in each stage are different, and the risk tolerance is different. The overly general financial thinking is not suitable for every stage.

For a retired old man who is entering his later years, it may not be appropriate to go to time as a friend to pursue compound interest. Similarly, he is still thinking about how to increase assets more quickly. Because the rapid increase in assets also means taking greater risks, and the increased assets may not be able to enjoy their own consumption. Therefore, the financial thinking mentioned above does not have much guiding significance for this group of people.

So what about a young workplace person? Is it necessary to reduce debts and pursue debt-freeness? In this regard, we have to carefully analyze the liabilities. I think there are three types of liabilities: the first is a monetary liability, the second is a benign liability, and the third is a neutral liability.

Malignant debts are relatively well understood, mainly referring to those arrears that have higher interest rates and exceed their ability to repay. The interest rate can be measured by the national benchmark loan interest rate. Generally speaking, it is more normal than the national benchmark interest rate of 20% to 30%, but more than 50% is relatively high. At the same time, it is important to pay attention to the fact that if the annualized interest rate exceeds 24%, then the interest rate of borrowing that is no longer protected by national laws is a usury. Therefore, according to their repayment ability and the interest rate of the loan, it can be roughly judged whether a debt is a vicious debt of its own. Because everyone’s economic situation is not the same, the use of loans will be different. Some people make loans to make more money for business. Some people use loans to save lives and use them urgently. The judgment on malignant liabilities will not be completely consistent. However, as long as it is your own malignant debt, you must find a way to repay it as soon as possible, otherwise it may become a bottomless pit, and let yourself be burdened with long-term high interest liabilities.

A benign debt is a liability that is beneficial to oneself. Some of these liabilities can resist inflation. Some can obtain higher yields than loan interest rates through borrowing investment, and some can make their assets grow faster. It belongs to the bank’s funds without compensation, and these can be regarded as benign liabilities. Of course, the premise of a benign debt is that it has sufficient repayment ability, and as time goes on, it will form a trend of reduced debt and increased assets.

For example, some young professionals choose to buy a house, which may be a commercial bank loan, which may be a provident fund loan, or a combination of bank loans and provident funds. In either case, the current mortgage interest rate is a very low loan interest rate. As a person in the workplace, it is natural to have a stable wage income, and with the rich experience of work, the development of career, the treatment can basically be expected to increase year by year, then this situation should not worry about the identity of their own “house slave.” Mortgage is a good benign debt for you. There is no need to repay the loan in advance. As long as there is enough repayment ability every month, the loan strategy should be as much as possible, and the loan will be longer. Mortgage can not only help you withstand inflation, but also have a certain role in promoting your own workplace improvement. There are real estate loans that don’t want to be lazy in work, or impulsive to make some irrational decisions.

For example, now you have a salary of 20,000 yuan a month, of which 10,000 yuan is used to pay back the mortgage. It seems that the proportion is high, which affects life, but you can think about your monthly salary has reached 50,000 after a few years. You still only need to pay 10,000 yuan, and then you may reach 100,000 yuan, you still need to pay 10,000 yuan. At that time, the purchasing power of 10,000 yuan may be equivalent to only 3,000 yuan. Ten thousand years ago, the ten thousand yuan household was very remarkable, because the 10,000 yuan at that time was equivalent to the current 2.55 million yuan! This is caused by inflation. You seem to have borrowed a lot of money and have to pay a lot of interest, but the continued inflation for more than a decade will make these liabilities much lighter.

In addition to the above benefits, mortgages can also allow you to get more assets with less money. Under normal circumstances, only one to 30% of the down payment is required to buy the first home. Although it is required to apply for a mortgage, it is equivalent to using 20% ​​to 30% of the money to buy a fixed asset, and this fixed asset can be used not only by yourself. The cost of renting a house can also be rented to others for rent, and the appreciation of the entire property can be enjoyed. You can even revalue the mortgage after the property has appreciated, and you can lend a sum of money.

Some people have better investment channels, and the annualized income of the investment exceeds the interest rate of the loan. Such a liability is also a benign liability, because it is equivalent to borrowing money to make money. For example, if your house is to be renovated, you may have already collected hundreds of thousands of decoration items, but it does not mean that you must use this money directly for decoration. As long as you have a better investment channel, you can apply for a Consumer loans or real estate mortgages mentioned above. Then use the loan money to decorate, and then gradually repay, and their original cash can be used to invest in wealth management to get higher than the loan interest rate.

Another type of benign debt is the arrears generated by credit cards. Consumers use credit cards for daily life, instead of using cash or bank cards directly, which is the bank’s funds for free. This kind of unpaid use of bank funds may not be large, but the time can be as long as 50 days. Therefore, if you encounter the purchase of home appliances, home, travel abroad, etc., even if you have enough funds, you should give priority to the use of credit cards, these arrears are benign liabilities, you have nothing to lose. Sometimes credit cards have an installment cost of 0 interest rate 0, and the liabilities generated in this case are also benign liabilities, which is equivalent to the long-term free possession of bank funds. Of course, the funds used for free will also be repaid within the prescribed time.

In addition to malignant liabilities and benign liabilities, there is also a neutral liability. Such liabilities cannot be judged simply. Sometimes they may evolve into vicious liabilities, and sometimes they may become benign liabilities. There is uncertainty. For example, the credit card arrears mentioned above, if you can repay the loan normally, it is a benign debt, but once your monthly bill is very high, you can’t get it for a while. When you choose the billing period, then you have to Several bills are charged for the handling of the bill, resulting in additional fees. You should not seem to have a small fee for billing, but as you repay each month, you will still have to pay the same fee every month, even if the remaining debts are getting less and less.

Take the 0.66% commission of a bank’s 12th period as an example. If you take 12 months to repay 12 months, then you need to pay 1,200/12+12000×0.66% for each period, that is, the principal is 1000 yuan. Plus 79.2 yuan interest. The first month can indeed be counted as 0.66% interest, which is 12,000 yuan x 0.66% = 79.2 yuan, but in the second month you only have 11,000 yuan in loans, but you still need to pay interest of 79.2 yuan, this The interest rate at the time is equivalent to 79.2/11000=0.72%. By analogy, when you only have a loan of 1,000 yuan in the last month, you still have to pay interest of 79.2 yuan, then the interest rate at this time is equivalent to 79.2/1000=7.92%! So the 12-year commission rate you need to pay is not simply 0.66% x 12=7.92%, but about 16% (7.92% x 2). In this way, you are actually equivalent to borrowing a loan from the bank that is more than three times the ordinary loan rate.

Therefore, in general, try not to choose the stage, especially when the amount of the bill is relatively large, because this is a kind of borrowing with high interest. I did not count the billing as a vicious liability, mainly because the funds used in the bank are usually not particularly large. The monthly repayment after the instalment will not have a big impact on myself. Earning money for the bank also helps to increase the credit card limit, but also solves your own urgent needs and takes up bank funds for a longer period of time. Credit card installments often include discounts on fees, points, gifts, etc. If this is the case, the loss of the fee can be reduced. One thing to pay special attention to is that once the installment is selected, there is no need to repay it in advance, because even if the prepayment is paid in advance, the fee will still be paid.

Similar to credit card staging, there are some credit-free cash loans, micro-credit loans in WeChat, and other unaudited credit loans. Usually, the loan is fast, the amount is not high, but the interest rate is high (usually the daily interest rate is 0.04% or more). These loans are not considered as vicious liabilities, they are used when needed, and they are repaid in time. Of course, if you can get these loans to get a higher investment income, it is not bad.

There is also a kind of debt, which belongs to the borrowing of friends and relatives. Such loans may have little interest or even interest, but this is to overdraw contacts and owe people, so it cannot be simply calculated as a benign debt or a malignant debt. It can only be regarded as a neutral liability, so this liability should also be repaid as soon as possible.

Understand three different liabilities, we can see that malignant liabilities are naturally less burdened, it is best not to carry, such liabilities should be repaid in time, thus reducing losses. Neutral liabilities should not be too much, depending on your own situation, unless you really need to carry it, and you have enough repayment ability to consider.

As a stable income person, there is no harm in carrying a certain benign debt. Instead, it can be regarded as a good financial management, so you don’t have to rush to repay these loans. For example, if you have made a considerable year-end award in the New Year, there is no need to rush to repay the mortgage in advance, but you should consider using this money to do better investment and financial management. For benign liabilities, as long as there is sufficient repayment ability, you can even try to borrow more and borrow more, which is more beneficial to yourself.

Today’s headline signing writer, Jane bookmarks writer, Linkedin columnist.

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