Overextending Your Borrowing

Another danger to avoid is over-leverage. This means continuing to make new purchases by using various forms of credit, ranging from mortgages to securities loans to credit cards. It can become an escalating habit after you get a taste for acquiring more and more with money you don’t actually have.

Borrowing has its advantages because it permits you to benefit from leverage. This means you can be in two (or more!) places at once by owning more than what you could without the extension of credit. You can have the house and the car. You can buy a building and invest in a business. But then you have to manage the expenses and risks commensurate with those commitments. That amounts to a variety of factors that sometimes ...

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