Have you ever heard the word ‘Co-holding? The term Co-holding’ is defined by Economists as simultaneously holding both Debt and sufficient liquid assets (E.g. cash). Holding both Savings and Debt can be costly because the interest earned on savings is often lower than the interest charged on borrowed funds.
Co-holders may deliberately save where the savings is targeted towards a project or held as precautionary/emergency funds. Some people also choose to have debts and yet keep savings account for psychological reasons – i.e. the good feeling of owning the funds in savings.
However, to GROW YOUR WEALTH, ensure a reasonable balance between your debts and the precautionary savings you want to hold. Ensure you are not unduly exposed to high interest expenses while earning lower on savings.
If you have access to overdrafts, credit cards and loans, PAUSE and establish your indebtedness. Check the cost to you of these debts and compare this to interest income expected from your savings.
Unfortunately, some people just glide by daily without knowing their true debt level. They keep taking available credit card offers from various merchants until they get lost in the vicious circle of debts. The first step towards getting out of debts is to PAUSE and ESTABLISH exactly what you owe.
Cost of borrowing funds (interest expense) is usually higher than interest rate on savings. It is advisable to pay your debts, eliminate the interest expense and thereafter build up your savings.
When reviewing your debts, determine to pay off the debt with the highest interest charges first. Do not yield to temptations to pay off the smallest debts. The smallest debt may be the cheapest. The cost of the debt should guide you on which to pay off first.
Review your financial position TODAY and get help to efficiently manage your indebtedness.
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