Lily J. Troutman
Friday, April 5th, 2022
Project: Financial Responsibility
Gerald R.
We are given three examples of people who are in credit card debt and who are wishing to buy their own house. It’s important to learn from each of these individuals. We’ll learn about financial responsibility, then we’ll compare each person’s story.
According to the article, The Basics of Financial Responsibility, “Financial responsibility means doing what you have to do to take care of your needs and the needs of your family.” Being responsible when it comes to finances would be making sure that you have a tight budget. Having a tight budget doesn’t necessarily mean that you can’t do any fun extracurricular activities, just while you are doing those things, keeping in mind that money is important. Other ways you can save money would be by eating at home more rather than out. “By contrast, the average meal prepared at home costs around $4 for groceries – a $9 savings per person per meal. To put it another way, a $13 restaurant meal is about 325% more expensive than a $4 meal you prepare yourself.” This also includes eating leftovers. Some other factors to consider are paying your bills on time, avoiding credit cards, having a reliable job, and not spending a fortune on housing. Financial responsibility, in other words, is preparing yourself for the unexpected. All of these things listed are ways that can set you up for success in life.
Even though it’s better to not have any debt, there is still an average credit score rate for Americans. The major things that make up these rates, according to value. is penguin.com,
Average credit score
Average credit score by age
Average credit score by income
Credit score variations by state
The average credit score of homebuyers
When looking at Gary and Greg’s scores, we aren’t given Greg's age, but we can tell that he has a good credit score, if he stays on pace, he should be out of credit-card debt in possibly less than 12 years. Then we see Greg’s score, who is 31, has 25 months until he is credit card debt free if he sticks to his financial plan. We were also told that both Greg and Gary have jobs that they are working at, that seem pretty reliable. Some people don’t know that having a low credit score if you are new to borrowing, is not necessarily a bad thing. In the article, “What Are the Different Credit Score Rates,” As long as you pay your bills on time and avoid maxing out your credit cards, your score should increase steadily over time.” Gary and Greg are already in the process of trying to find a good payment strategy. They also both realize that paying off debt is sometimes hard work, which is why they plan on getting better housing, and no longer spending money on their credit cards, rather use their own money at hand.
Some people say that there is no such thing as too much debt. Is this true?
Rather than thinking of debt as, ‘good or bad’ it’s important to remember that debt is not a person. Even though debt can cause lots and shame, but also once it’s cleared up, it’s no longer a negative problem that you have to deal with. That is if you learn from your mistakes. Debt is a financial tool that allows people to pay for a big-ticket item. Then it also gives borrowers a chance to pay off that debt in a short, or long period of time. It’s important to also think wisely before borrowing money. You should be contemplating:
Your mortgage per month is an affordable and practical amount of money.
Make sure you understand the terms of borrowing money.
Christy Beber wrote a short article called, “4 Things You Must Do Before You Borrow Money.” She says when it comes to understanding the terms of your loan are:
What is your interest rate?
What is the total cost of the loan?
How long do you have to repay what you owe?
What your monthly payment will be?
Whether your interest rate and/or monthly payment could rise?
What fees, if any, you'll be charged for the loan?
Whether you will be charged if you pay off your loan ahead of schedule?
In our example with Bob, who has seven credit cards, and hopefully in 52 months he will be able to pay off a debt of 28,0000 with an extra interest of 10,247.61, he may not have been thinking about what it would cost him extra to take out loans. It’s also important to work your payments into your monthly budget. Currently, Bob doesn’t have a budget, which means that he needs to find out a way can make one. Bob was also told that he should pay a little bit more each month if possible, which might help him get out of credit card debt in less than 52 months. Bob is looking into new housing… He realizes that he needs to be more careful with his money so heś buying something cheap. However, where Bob lives, there wasn't any way that he could buy a house for only $2,000. Therefore he had to bump his budget up an extra 2 thousand dollars.
With financial responsibility and credit score reliability on each character's mind, in the future, each individual should have learned an important lesson on not getting into debt that is almost impossible for someone to pay off.
Sources;
The Basics of Financial Responsibility. (n.d.). Investopedia. Retrieved April 15, 2022, from https://www.investopedia.com/articles/pf/09/financial-responsibility.asp#:~:text=Financial%20responsibly%20means%20doing%20what
Farrington, R. (2014, February 24). 10 Tips for Financial Responsibility While in College. The College Investor. https://thecollegeinvestor.com/11772/10-tips-for-financial-responsibility-while-in-college/
(2020). Moneyunder30.com. https://www.moneyunder30.com/the-true-cost-of-eating-in-restaurants-and-how-to-save#:~:text=By%20contrast%2C%20the%20average%20meal
Resendiz, J. (2016, March 2). Average Credit Score in America: 2019 Report. ValuePenguin; ValuePenguin. https://www.valuepenguin.com/average-credit-score
Akin, J. (2019, January 7). What are the Different Credit Score Ranges? Experian.com. https://www.experian.com/blogs/ask-experian/infographic-what-are-the-different-scoring-ranges/
How much debt is too much debt? | Awkward Money Questions. (n.d.). Www.youtube.com. Retrieved April 15, 2022, from https://youtu.be/lXx2PB2QFYY
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