Financial Planning – Borrowing on Open Account – Chapter 6
Why do people borrow?
- To pay cash for large expenditures
- To meet a financial emergency
- For convenience
- For investment purposes
Improper uses of credit
-Overspending and carrying on balances by just paying the minimum monthly payment
- DON’T spend on basic living expenses, impulse purchases (especially expensive ones),
nondurable/short-lived goods and services.
Establish a Credit
Establish a stable, long-term relationship with a financial institution:
• Open checking and savings accounts.
• Get one card and make small purchases.
• Use the card periodically
Obtain a small loan:
• Make regular payments and retire the loan in accordance with the loan agreement
Build a strong credit history
– Not getting overextended.
– Fulfilling all terms of credit obligations.