Beware of Using Other People’s Money–Debt and Credit?
In the preceding courses and activities we learned the importance of setting goals, being responsible for our own cash inflow and outflow, spending less than we earn, and saving money. These components form the foundation of a good manager of money. Another aspect of managing money is to use debt correctly.
For most, the ability to save enough to pay the financial costs of achieving some of our goals is very difficult. Whether our goals include starting a business, buying a house or car, or paying for education we may need to borrow money.
The words debt and credit have many different meanings. We will use credit to refer to the trustworthiness and the Creditability we have to borrow money, and debt as our obligation to repay the money we have borrowed. Once creditability has been established borrowed money is provided to us a loan or line of credit. By excepting borrowed money we are in debt to the lender.