Explore ways to avoid financial ruin

(ARA) - You see them on college campuses and at county fairs, people offering free T-shirts when you sign up for a credit card. You get offers in the mail every day - instant approval for the credit card of your choice. But just because you have access to seemingly unlimited credit does not necessarily mean you should take the credit card industry up on the offer.

Larry Lazofson, professor of business administration at DeVry University, Columbus, offers these tips for young people:

• Know What You Can Afford

Never rely on a lender to determine how much debt you can manage. There are lenders who will readily extend enough credit to place you in a cash-strapped position where a large chunk of your earnings will go directly to paying their interest.

Every borrower needs to carefully review their finances to determine how much debt he or she can safely and comfortably afford. A simple debt-to-income calculator can be found at www.bankrate. com. It is your responsibility, as a borrower, to do the research on how much debt a person at your income level can handle.

• Build a Financial Mountain or Dig a Hole of Debt

When you save money and earn interest your investment compounds over time, like a snowball rolling downhill that becomes bigger the further it goes. Too many people borrow money to purchase things that lose value such as designer clothing, electronics and expensive cars. Putting lots of consumer goods on your credit cards can saddle you with debt for years and sap your personal savings. It's always a better investment to save and build interest rather than spend and pay interest.

• No Easy Escape

Some people believe that filing for bankruptcy will allow them to escape their financial troubles. Federal bankruptcy laws were revised in 2005, making it much harder to erase debt by filing for bankruptcy. If a college student plans on finding a good, professional job after completing his education, he should think twice before attempting to file for bankruptcy. Many employers do background checks and will not hire an employee with a poor history of managing finances.

"College students need to understand taking advantage of easy credit is not worth the risk," says Lazofson.

"Young adults bound for college, students and everyone, for that matter, need to carefully consider their consumer purchases, especially if making them on credit, and instead choose to invest in themselves and in the future."

Courtesy of ARAcontent