About Debt - part I

Most of the regular folks are broke and they do not have any cash in their pockets because they are in debt up to their eyeballs.

The only help they can look for are the commercial banks to help them consolidate their debts and give them lowest possible interest rates when repaying the loan.

According to a recent USA Today article about debt, 78% of Baby Boomers have mortgage debt, 59% have credit card debt, and 56% have car payments. If you want to lower your debt, it will take you a lot of discipline and courage to do so. However, it can be done.

Using a debt, we can buy a home, a car, or start a new business. I remember a finance professor telling us that debt was a two-edged sword, which would perfectly cut for you like a sharpest knife, but could also cut you and harm you.

Consider the Risk
Risk aversion id a characteristic of an individual's preferences in risk-taking situations. It is a measure of willingless to pay to reduce one's exposure to risk. In evaluating trade-offs between the costs and benefits of reducing risk, risk-averse people prefer the lower-risk alternatives for the same cost. For example, if you are generally willing to accept a lower expected rate of return on an investment because it offers a more predictable rate of return, you are risk averse. When choosing among investment alternatives with the same expected rate of return, a risk averse individual chooses the alternative with the lowest risk.