It is more or less expected these days – particularly if you are aiming to get a business up and running – that you will need to take on a bit of debt to get by. While it’s certainly true to say that you can live a life without debt, there are plenty of people who will argue that it’s neither necessary nor desirable to do so.

We are definitely living in an age where debt has been rethought, and it is no longer shameful to be “in debt”, but this does mean that we need to think about how we approach borrowing and manage our finances.

The most uncontroversial thing you can say about borrowing is that it is important to keep your debt levels under control. A certain amount of borrowing is fine, but the higher your commitments get and the less they are balanced with your income, the further away you will be from a comfortable position. So it is worth always putting any debt you take on through the following tests.

Are You Borrowing Only What You Will Need?

The main reason that any of us borrows is to make a purchase or take on a financial burden that we can’t clear in one go with available funds. It may be that we take out a loan to buy a car, or put a household appliance on credit when the old one breaks down. When borrowing in this way, we need to ask ourselves if we need every penny that we are taking on. The more you borrow, the more exposed you are, and if you had to repay it in a hurry you’d regret adding an extra chunk of debt to the tally because you thought it would be nice to have an ice cream maker or other extravagance.

Do You Know Where the Money Will Come From to Pay This Off?

A major danger of the more permissive financial era is that once we have accepted that some borrowing is OK, it can be hard to draw a firm line. It becomes easier to push it a little, and put a purchase on credit while thinking “I’ll make a few savings here and there and will be able to pay for this”. Unless you know where “here and there” are, that’s a terrible idea. You will need to find areas where you can cut your outgoings; with ideas such as the Debt to Success System, scam providers can be avoided and you won’t need to take on more debt than you can manage. Never make a purchase that you don’t know you can fund.

Do You Need or Want a Higher Credit Limit?

Credit card companies monitor your credit record, watch what you borrow and how much you pay back and, based on what they see, may well offer you additional borrowing power from time to time. It’s good to know that they see you as trustworthy with increased borrowing, but if you haven’t asked for it and don’t need it, there is no reason to accept it. If you know you can spend $10,000 in one fell swoop, you are more likely to make more reckless decisions. Having a lower credit limit than you could have ensures that you think more carefully about every spending decision, and it’s better for you to stick with that.