Love tends to be blind, especially when the couple is engaged or planning their wedding. While I believe that love immediately after the honeymoon just doesn't disappear, as most people think, I still think that finances are capable of having a significant impact on the couple's relationship after marriage. Next, take a look at the three smart financial decisions that the couple should discuss before establishing a marriage link.
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Fuction of credit liabilities
You may think that your credit card debt of 1000 euros and leasing of 10,000 euros is not great, because so far you have successfully made their monthly payments so far, but your budget for such credit commitments may turn out to be too low, perhaps because also your other half has some debt that most spouses combine after the wedding. For this reason, it is also very important to find out the amount of the other person's credit obligations before, rather than after, the wedding. It is highly recommended that both discuss not only the two credit obligations, but also any other financial obligations. When your total amount of credit and financial commitments is known, try to reduce it by at least 50% until your wedding day. Such a reduction in the amount of credit may require more hours of work, additional work or even a second job search, but it is easier to overcome this drastic credit before and after the wedding.
Discuss your financial goals
You and your partner should spend some time identifying and writing their financial goals. This list should then be discussed in order to understand how consistent these objectives are and what adjustments should be made so that they are uniform and realistic. These goals might look like this: get rid of credit obligations, get a higher degree at home, live at home with children, don't work for 3 years, go on a trip every year, buy a house for 2 years and so on. Whatever your financial goals for the next 5-10 years, you should count on them, including them in your budget plan. If you decide jointly that, for example, a mother with a child will live at home for 3 years without having to work, you should act wisely after marriage. Namely, you should immediately try to live from one salary by creating a strong savings account and a stable fund of funds in it.
Consider the cost of your wedding
If you are planning a wedding for your own finances, you will definitely want to cut all your costs as much as possible. Engaging in short-term credit commitments of, for example, EUR 20,000, due to one day of holidays, namely wedding days, seems to be a bit extreme. Try to cover all your wedding expenses with your personal financial resources and remember that the wedding day is a couple's holiday, not a wedding day, which should look worthy of the magazine cover. What makes sense to surprise wedding guests with a bouncy wedding if you are tied to credit for at least 10 years. Wedding planning is a worrying time for every couple, but one should not forget about discussing both financial and financial goals, as well as drawing up a common budget before it is too late. During wedding planning such conversations may not be nice, but they will solve many issues that will no longer need to be touched by marriage.
QUICK LOANS
Fast credits, short-term credits, online loans or sms credits are all names for one service that has gained a great deal of polarization both in the mass media and among our nation's population. These services, commonly referred to as "quick loans" by people on the one hand, appear to be very beneficial as they provide assistance to people in need, but on the other hand they can further ruin their lives because, unlike other loans, these short-term loans is a very high interest rate, which can make up to several hundred percent a year. Financial institutions, or companies that provide these short-term loans, usually get a very high return on the money originally invested, and even up to 50% of their total turnover, which they do not like either for consumers or politicians, because the profit of this size is unnatural.
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Of course, quick loans are mostly offered and placed directly on the less well-off people who live so to say from "wage to salary" and are unable to cover their monthly payments, and also choose to receive these short-term loans, which are usually due within 30 days. But where the demand will be, there will be an offer, and if people would not take such a service, it would not be offered. That is why today we will try to understand and analyze everything related to this controversial financial service.
Before taking short-term loans, you should first understand what credit is really, because this concept is not as simple as it might seem superficial. The credit as such has been used for centuries or even thousands of years, because even before mankind invented the money it used exchange trading, where people changed with different goods and because, for example, a cow cannot be split into pieces to exchange one bag of grain , then people remained in debt, which is essentially a promise to repay the remainder later. In the same way, when money was invented, people continued to do so, and they borrowed money from each other to do a variety of things, from buying cereals to arranging weddings.
At first, no interest was set on credits and basically how much you borrowed had to give back as much, but because this practice became more common as people began to realize that not all debtors (people borrowing) paid money in time. And that's why interest payments were invented, which, in essence, enable the lender to earn and reduce his risk by charging money from people who pay hard loans to avoid losing money to people who either delay or fail to repay money. In this way, more or less, this concept and action, which we know today as a 'credit', were born, which is then based on the promise of repaying the money that you have borrowed and paying a certain interest rate on that loan.
The Economy of ExchangeThe debt, credit, or loan has long been in human culture, and even 4,000 years before our era, we have listed a variety of financial activities, one of which is how much and what credits have been for man. Of course, in those times the credit was completely different than it is today and it is basically because people were mostly dealing with the lending of different things and did not use a single piece of valuables so widely to change among themselves, as is the case with money today. Of course, in those times, people listened to the value of the property, and if you had lent something that is just as worth as one bull, then you will have to recover the same or something in the future that will be comparable to this loan. case.
In small communities, people usually give each other the necessary things, saying that there is no need to give anything back and that is just a gift, but in reality as soon as such a gift is given to a person who was gifted, he felt like a debtor paid off. The system of such a gift, or unaccountable debt, was maintained in many small communities, and people usually remembered all those to whom they owe and who were owed to them, but these debts were usually not so serious that they should be tried and had no interest payments, because how could you pay interest on, for example, a loaned bovine? If we look at newer times when different big empires began to develop, then the loans were already more serious and were already counted in cash, because the empires usually made money and made them pay all the people living in that area.
And when it was not possible to pay the prescribed tax, usually farmers had to borrow either grain or other things to pay off these taxes and because this debt was no longer as a gift, it was usually given by the creditor to repay the time. This repayment was usually not as easy as it might seem, and if the farmer was unable to return the debt, then he had to give back his movable and later real estate, but if his debt could not be repaid even by his family members in slavery where they had must work with the creditor until the debt is repaid.
Such a system was undoubtedly unfair to the people who took these credits, and because the interest rate on the credit was so high, the creditors were often one of the richest people in their area and the more money they had, the more credits they could have to issue. And then, in ancient times, this class inequality emerged, where the rich usually became richer, but the poor were getting poorer, and it was virtually impossible to get out of this circle. Many historians and economists, including Adam Smith, believed that money and the modern economic system evolved from the need for people to change commodities efficiently, and that every transaction was slow and ineffective before money was created.
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But based on the book "Credit: The First 5000 Years", then money and credit are basically the way we know it was created from the states and governments by creating a single currency to pay their soldiers and thus maintain the huge armies needed for the ongoing warfare and conquests. And this, in turn, only means that today money and currencies are basically created by the government, even though the executors are banks, but the state is making laws that the debtors who cannot pay can be held accountable and thus created. a system where the saying, "all the debts have to be given back" is imposed and people understand it as a matter of course, although the states and governments themselves rarely return all their debts and every time the coups occur, the first thing people get is the destruction of data about whoever owes.
Credit in the MomentsCredits in the 21st Century are issued for virtually anything we can imagine, but especially much for larger purchases, such as apartments, houses, cars or some electrical items. Credit commitments have remained so self-evident that consumers can no longer imagine how to buy goods that are more expensive than a few hundred USD without taking out a loan and, moreover, with assets worth several thousand. Such car loan and mortgage loan commitments are often made by consumers for several years or even decades, and all this time the credit interest is then paid from which the banks and the private creditors also earn.
And it may seem self-evident, or vice versa, that people can live with credit all the time, but this is the reality of today's average consumer, as the average NETO payment in 2014 was 540 USD and with this amount of money a person has to cover both living and eating costs. and if there is still a desire to buy a car then its maintenance must also be covered by such payment. And given this figure and the fact that the cost of living nowhere in Latvia is too cheap, it is understandable, for example, that one-bedroom apartment in one of Latvia's cities with an average price of 30 thousand Euro with 540 Euro salary is almost impossible to buy without credit . If we count, then these 30 thousand are actually more than 55 full-time salaries, which is more than 4.6 years of work. Such a figure opens the eyes of many people, because an ordinary apartment in one of the cities of Latvia would not have to pay almost 5 years of work and this is taking into account the average salary of Latvia, not to mention the minimum NETO salary that was under 250 USD in 2014, which is about 10 years of work.
And these years of work are calculated so that the whole salary is postponed for the purchase of this home, which is theoretically not possible, and therefore, for example, postponing one third of what financial experts recommend as the maximum amount of credit in relation to wages, these periods would be 15 times. years with average wage and 30 years with minimum wage. And I doubt if the person who will have counted these figures will believe that it should be and will not feel cheated in any way. And the same is true for a variety of other larger purchases, such as a new car that costs 20,000 and about 10 years old, and it is already possible to buy 5 to 7,000 Euros depending on the make of this car. This amount of money is then also very high if it has to be obtained only from the salary. This means that even to raise money for a 10-year-old car you will need several years and then you will have to maintain that car and also buy fuel to use it. And the last category where people still use credits today are various small purchases that are a bit too big for them to be covered by one salary, but too small to be considered a big money outlay. These purchases are various home appliances, home improvement products, or, for example, a trip that then costs several hundred Euros. For these purchases, people usually choose either consumer credit or quick loans, and every time this service is withdrawn, money is lost in interest payments. And all this just shows that consumers nowadays choose credit as the main way to get new goods and services, thus replacing money.
Credit commitments today are so widespread that almost every third person in Latvian society is involved in smaller or larger credit liabilities. The total loan liabilities of the Bank of Latvia, or the so-called loan portfolio, can be measured at around USD15 billion, and if we divide this figure by the number of inhabitants of Latvia, it can be seen that every inhabitant of Latvia has an average debt of seven thousand Euros, including all children, pensioners and unemployed. Of course, not all people have a credit commitment and those who have taken a loan on credit have a much higher credit obligation, but on average, these 7000 USD come together, which is a huge sum of money. This loan portfolio includes both household and corporate loans, and it is the corporate debt liabilities that make up a large part of this debt.
But if we return to the original question, which then really takes credit, then it must be said that basically all groups of people, from poor to rich, use credit obligations and these loans are given for a variety of purposes ranging from making simple purchases or starting up businesses to building or buying housing. . And even those who have a lot of money are willing to use credits because they can use their money to build a business and at the same time get additional money from creditors! Credit commitments help people start businesses, repair housing, buy movable and immovable property, and just because we are used to living right now and not thinking about the future then we can say that all parts of society use these services and basically only the richest people do not use credit because they are the ones who issue them.
But besides these licensed lenders, every individual can also lend to another private individual by completing a set of documents and thus making the transaction legal, rather than doing so in the so-called shadow economy without paying taxes. These companies and the banks that issue the loans do so with their own rules, but these legal entities must also comply with the rules set by the state, which are also explained in the laws on the issuance of licenses for banks and non-bank creditors. It is possible for these lenders to receive cash loans ranging from a few dozen USD to several hundred thousand or even millions of USD if that credit institution trusts that you will be able to repay that money.
If we look at the past then it can be seen that loans have been issued for a long time by individuals with more money than the rest of the public, which then also receives these loans, and this wealth is usually only increased where the value of the borrowers slowly slows down. is falling because you have to pay interest on the use of this loan every month.
The good and bad the company is generally paying close attention to the granting and receiving of loans by praising creditors and giving them the opportunity to borrow money when it is really necessary for people, and on the other, condemning high interest rates and various fines for late payment of monthly payments.
Credit and indebtedness have always been and will be the concept we can discuss and try to understand if this thing is good or bad and that is because credits are very easy to get and people may feel that this money will never be refunded, but When interest starts to count, the amount of this credit can grow so quickly that it is no longer possible to repay. But there are also a lot of cases when people are left without money and credit is the only way to get out of this pit, then gradually repay this debt.
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Credit commitments give you the chance to get away from a situation where you are left without money, but you have the means to survive.
The loan allows you to purchase movable and immovable property and immediately start using it instead of storing money for decades to then buy these properties.
It is possible to start a business with a loan, instantly getting the means to buy the technique that is necessary and also for a paid workforce, which will also create products or services that will bring money in the future.
Loans allow people to buy goods or services that have a discount today if the salary is credited only in the future and thus even paying the creditor can save interest.
The credit allows the credit issuer to use their earned money and receive interest payments on the fact that this money is lent, thus generating money from money.
Credit allows you to overcome economic crises, when incoming money is smaller, but even reducing spending is not possible to say 'pull ends'.
The loan can also be useful if you happen to have an unexpected expense, such as car repairs or the purchase of new home appliances, and the monthly budget for such money to cover those costs.
Credit allows you to spend money today and then slowly repay it exactly as the modern generation wants it, because unlike in the past when the savings were made, people now want to live today rather than worry about the future.
When you receive a loan, you have to pay interest on its use, which in the long run will cost you much more than the principal amount of the credit you receive.
In long-term credit commitments, monthly payments are usually the same and you have to pay the same amount even if the economy is in recession and wages are reduced.
Without paying off his credit obligations by law, the creditor has the right to sue the debtor and then has to sell all his movable and immovable property to cover his credit obligations.
Borrowing money instead of collecting money does not feel the real value of this money and is therefore much more cumbersome, but then he has to repay that money, which is even more difficult.
Credit obligations cause stress because a person who owes money understands that he will have to return a portion of his income to his creditor every month, and this must be done until the entire loan is repaid.
Credits usually cause a person to spend more than he can actually afford, because receiving any loan means you can't cover that payment from your income or savings and you have to borrow to be able to buy the product.
Many creditors have the condition that when receiving a loan, the customer must also cover the credit granting fees, which are often 1-3% of the total principal amount of the loan and thus the total amount of the credit of the client is still increasing.
The loan is based on borrowing from your future income and you are unlikely to pay in the future for something that you have already used and that you have to repay now and still have to pay interest on receiving that money.
Monthly loan payments prevent people from spending money on things that are important to them, because every month, when you get a loan, you will have to return part of your salary to the credit institution and often have to give up to a third of your income each month on a long-term basis.
Excessive credit commitments can lead to pairs to divorce, because the pressure that comes when you have to return a large portion of your family's income every month to the bank is huge. And this pressure is often the cause of persistent disputes and can lead to family relationships up to a level where both sides are no longer able to live and demand divorce.
Interest on credit is usually calculated from the total amount of the loan and therefore if you spend some interest you will be charged this amount
Bubble economy Today, a large part of economic growth is made directly from purchases made with credit, and that is because people can make various purchases at the same time, without waiting for several years, until they have accumulated enough money.
But the problem arises when people have taken so many credits that they are not issued more and then slowly have to repay these loans, and until the money is repaid to these debtors there is no money to buy goods and services and therefore economic growth stops . The financial bubbles that have exploded in recent years and decades have all been less or less related to loans, as was the case in the US in the 1930s, when there was a major depression, largely due to car loans. Or at the beginning of the 2000s, when the Internet bubble burst where people borrowed money and invested in various Internet companies.
Or, in 2008, when the mortgage bubble burst, which we all still remember well, because of suddenly rising unemployment in Latvia, our country had to borrow money to cover the huge monthly expenses that we have yet to repay. All of these events are directly related to lending, as the example of the 2008 bubble, for example, was due to the fact that banks started to lend too easily even to people who were at high risk of not repaying these loans. By issuing such loans virtually without the first installment, the banks created a market in which house prices climbed at deafening speeds and people had to borrow more and more money to buy these dwellings. And when a large proportion of these debtors began to pay off their loans and the banks took them away, there were too many dwellings on the market that were on sale and their value began to shrink.
But this dwindling value, in turn, made even more people to abandon their housing because the outstanding amount of credit still had to be several times higher than the value of the real home. And so this crisis continued until the big banks were left with so many homes that they could no longer pay the credit they had in turn taken from the investors and the government had to intervene and redeem these financial institutions from this chase. Bubbles in the economy are basically caused by the fact that people become too greedy and see that others are earning from an activity trying to repeat it and so it is usually also called speculation.
Professionals in the industry where such irrational cash inflows and price increases usually realize quickly that it will not last forever, but the money that can be earned in such a bubble is huge and therefore they do not usually protest. But those who simply run along with the crowd often understand the industry as either very little or nothing, and so they are easy to fool and say that what a price is true, though it's a lot too high. But when this speculation has reached a certain point that even newcomers to the industry are beginning to realize that prices are too high, this bubble may burst in one day and prices may fall several times over a few weeks or months. That's why every time it is seen that a large part of consumers are trying to invest in a place where it is 'easy' to earn, it is clear that you do not have to do the same, because sooner or later this bubble will explode and those who lose the most money there will be people who understand this industry very little and who, because of their greed, have tried to invest money without understanding all the risks.
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Interest can basically be placed in two categories, which are long-term and short-term credit liabilities, where long-term loans are for large purchases, such as home purchase, car purchase or university education, but short-term credits are intended to cover unforeseen expenses, prevention of various medical disasters and electrical goods or for home appliances. How these two groups are divided sharply from the one who speaks about them, but basically a short-term loan is a loan with a repayment term of no more than 6 months or one year and all loans with a maturity of over one year are considered long-term loans. But what are the differences between these loans and which one should you use if you need money?
At the outset, it should be noted that short-term loans usually have both short repayment terms and their total loan amount is usually much lower than for long-term loans. Therefore, if you need to buy a good worth less than one or two thousand Euros, you probably have to choose a short-term loan. Short-term loans are called both quick loans and consumer loans, and leasing is also considered a short-term loan. All these services usually differ from long-term loans by the fact that they are measured in tens or even hundreds of percent per annum, but precisely because the debtor has to return the money much faster then these GPLs, or annual interest rates, would not really be appropriate to the loan, less than one year.
And so, often, for example, SMS loans have monthly interest rates of, for example, 10%, and if you give up a loan after a month you will have to give up 10% more and it doesn't seem so crazy, but if we to look at the GPL of such loans, which is 120% then it seems incredibly high. Long-term credit commitments are usually made by purchasing a really serious commodity, whether it is a dwelling, a car or an education, and are called long-term loans because the total amount of these loans is usually over a couple of thousand euros and often even tens of thousands, and also repayments the deadlines are much longer and can even take several decades. Long-term loans are most often taken for home and car purchase because they are things without what people today can no longer do in theory, because each of us needs a roof overhead and an opportunity to get to their workplace at any time of the year.
Whether you choose to get a short-term or long-term credit, you should definitely think about whether you can repay the loan and this is especially the case for long-term loans, because here you promise to pay the loan for many years, no matter what month you are there will be or will not be a job, or you will have some misfortune or some other change of life.
If we look at the credit then it is definitely worth mentioning that often lenders are restricted directly by the state with different laws, and that is because credit institutions do not create situations where consumers simply can no longer repay these loans. But if we look at this sector in such a section, it is similar to the example of the alcohol, gambling or tobacco industries, because governments too often intervene, collecting huge taxes as well as drafting different laws to protect consumers. As in the alcohol industry, for example, drinks may not be sold to minors, nor after the 10th and just as in the credit sector, the state imposes a variety of conditions, starting with the fact that no night loans may be issued, nor may interest be higher than the national level and all companies who wants to operate in this industry must obtain a license and extend it for a fixed amount of money each year. From the point of view of the business and the market economy, such a limitation of businesses is certainly not right, because it creates an unnatural competitive market in which large banks, for example, can afford to lend with lower interest rates and thus compete with all market entrants, for example by limiting fast credit issuers.
And even if such restraint would not lead to unnatural competition, it is still not right, because every person, however, has their own choice and no one is forced to receive these loans, and then complain that it is not possible to repay the money even if after receiving this loan, it was clear to the person that it would have to be repaid sooner or later. And is the granting of loans really comparable to industries such as alcohol and cigarettes, where people can become addicted to these substances and should therefore be protected? Is it just as good when comparing credits with gambling or borrowers from receiving money to get the same thing as winning at slot machines or casinos that he wants to play again and again? I believe that borrowing a person might want to borrow even more, as once a loan is received, it is usually necessary to start paying the monthly loan interest and repayment of the principal, but when receiving this money, the debtor is usually aware of these risks and in the future will definitely have to repay the money and plus interest payments.
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