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2 min read

How to Manage Your Finances / By: Cristian Rojas-Torres

 In today’s world, debt has become a very common aspect of finance.  From student loans to credit card balances, many individuals have found themselves under various forms of debt.  Debt management isn't only about avoiding debt but also about understanding it. It’s easy to purchase items with credit cards, but remember, it's money you are borrowing from the bank. If you do not borrow responsibly, it can be challenging to pay the money back. Debt management is important to understand because as teens reach adulthood they will have to learn how to manage their finances. 

There are different ways to identify good debt and bad debt. Good debt usually involves asset purchases, such as buying a home or funding a business but having to take out a loan or usage of a credit product. Bad debt, on the other hand, involves you making unnecessary purchases that do not benefit you in any way and can just increase your debt, which can lead to your credit score decreasing. 

In the Harvard Business Review, Rakshitha Arni Ravishankar explains how it is good to keep some savings to the side. “Have at least $1,000 in your emergency fund, especially if you’re just starting to save or still paying off debt.” (Ravishankar, 2022). Being able to know that you are safe because you have money saved on the side is a perfect start when you start saving, because if anything happens, you can just take it from your savings. “Most Americans carry around at least one credit card, and the average balance on a credit card is just under $5,910 as of 2022” (Calonia, 2023).   Credit cards do offer convenience, but they could also be a high risk if it's not managed responsibly. Erika Ramirez, a college student, stated, “I am going to graduate with minimal debt, build good credit and save for the future while managing current loans and credit card balance. Economic changes can impact my debt management.” Mr. Perina, a finance teacher, states, “My financial goals are focused on independence, retirement savings and wealth through investments while being able to manage my mortgage and credit card debt. I want to stay out of debt and spend my money wisely.” 

All in all, understanding and managing debt is essential in today's world. Being able to tell the difference between good debt and bad debt is crucial for financial stability and ensuring positive credit scores. 


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