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Cindy Couyoumjian On Understanding Credit: How Debt Can Make or Break Your Financial Future

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Credit plays a crucial role in our financial lives, affecting everything from major purchases like homes and cars to our ability to secure loans and even land a job. While debt is often viewed negatively, when used wisely, it can be a powerful tool for building wealth and financial stability. On the other hand, mismanaged debt can lead to financial hardship, stress, and long-term consequences.


Understanding how to manage credit effectively is essential for long-term financial health. Cindy Couyoumjian, a Certified Financial Planner™ (CFP) with over 37 years of experience, emphasizes financial literacy as a key component of responsible debt management. As the founder and CEO of Cinergy Financial, a bestselling author, and a passionate advocate for financial empowerment, she helps individuals make informed decisions about borrowing and credit use. Cindy Couyoumjian believes that when managed wisely, credit can serve as a valuable tool for building wealth and financial stability. However, without proper knowledge, debt can become a significant burden. By educating individuals on smart credit strategies, she equips them with the skills to secure their financial future and avoid the pitfalls of excessive debt. In this article, Cindy Couyoumjian will explore the fundamentals of credit, the impact of debt on financial well-being, and best practices for managing credit responsibly.

 

The Basics of Credit and Debt


Credit is essentially borrowed money that must be repaid, usually with interest. Lenders, such as banks and credit card companies, extend credit to individuals based on their creditworthiness. Cindy Couyoumjian explains that this assessment is largely determined by a person's credit score, which is calculated based on their credit history.


Debt, on the other hand, is the amount of money borrowed that must be repaid. Cindy Couyoumjian shares that it comes in various forms, including:


  • Credit Cards: Revolving debt that allows borrowers to spend up to a certain limit and pay interest on outstanding balances.
  • Mortgages: Long-term loans used to purchase real estate, often repaid over 15 to 30 years.
  • Auto Loans: Loans specifically for purchasing vehicles, typically repaid in monthly installments.
  • Student Loans: Borrowed funds used to finance education, often with lower interest rates and flexible repayment terms.
  • Personal Loans: Unsecured loans that can be used for various expenses, such as medical bills, home improvements, or consolidating other debts.


Each type of debt has different terms, interest rates, and impacts on a borrower's financial health.

 

How Debt Affects Your Financial Future


Debt can be a double-edged sword. While it can enable opportunities like homeownership, higher education, and business investment, it can also create significant financial stress if mismanaged. Cindy Couyoumjian shares some key ways debt can influence your financial future:


1. Credit Score Impact


Your credit score is one of the most important indicators of financial health. Cindy Couyoumjian explains that it is influenced by:

  • Payment History (35%) – Making payments on time improves your score, while missed or late payments hurt it.
  • Credit Utilization (30%) – High balances on credit cards relative to your credit limit can lower your score.
  • Length of Credit History (15%) – A longer credit history generally helps your score.
  • Credit Mix (10%) – Having a diverse mix of credit (e.g., credit cards, auto loans, and mortgages) can improve your score.
  • New Credit (10%) – Opening multiple new accounts in a short period can lower your score.

A strong credit score helps you secure better loan terms, lower interest rates, and access to financial opportunities.

 

2. Interest Costs and Long-Term Debt


Interest is the cost of borrowing money. Cindy Couyoumjian understands that if you carry a balance on high-interest credit cards or take out loans with high rates, you may end up paying significantly more than the original loan amount. For example, a $5,000 credit card balance with a 20% annual interest rate can cost thousands in interest if only minimum payments are made. The longer you take to pay off debt, the more interest you accrue, making financial goals harder to achieve.

 

3. Financial Stress and Lifestyle Limitations


Excessive debt can create significant stress and limit financial flexibility. High monthly payments can restrict your ability to save for retirement, invest, or cover emergency expenses. Cindy Couyoumjian explains that individuals with overwhelming debt often experience anxiety, relationship strain, and reduced quality of life.

 

4. Wealth-Building Opportunities


When managed wisely, debt can be a tool for building wealth. For example:

  • Real Estate Investment: A mortgage allows individuals to buy property, which can appreciate in value over time.
  • Education and Career Growth: Student loans can finance degrees that lead to higher earning potential.
  • Business Financing: Entrepreneurs can use loans to start or expand businesses, potentially generating significant income.

However, these benefits are only realized when debt is taken on strategically and repaid responsibly.

 

Strategies for Managing Debt Responsibly


To harness the benefits of credit while avoiding financial pitfalls, Cindy Couyoumjian recommends considering the following best practices:


1. Pay Bills on Time

Timely payments are the single most important factor in maintaining a strong credit score. Setting up automatic payments or reminders can help ensure you never miss a due date.

2. Keep Credit Utilization Low

Try to keep credit card balances below 30% of your available credit limit. This demonstrates responsible credit usage and prevents excessive interest charges.

3. Avoid Unnecessary Debt

Before taking on new debt, consider whether it aligns with your financial goals. Avoid borrowing for unnecessary expenses or luxuries that do not provide long-term value.

4. Pay More Than the Minimum

If possible, pay more than the minimum required on credit cards and loans. This reduces interest costs and accelerates debt repayment.

5. Build an Emergency Fund

Having savings set aside for emergencies can prevent the need to rely on credit cards or loans when unexpected expenses arise. A good rule of thumb is to save three to six months' worth of living expenses.

6. Seek Professional Advice When Needed

If you find yourself overwhelmed by debt, consider speaking with a financial advisor or credit counselor. They can help you develop a strategy to manage debt, negotiate lower interest rates, or consolidate loans.

 

Credit and debt are integral parts of modern financial life. When used responsibly, credit can be a valuable tool for achieving financial goals, such as buying a home, investing in education, or starting a business. However, mismanaging debt can lead to financial hardship and long-term consequences. Cindy Couyoumjian of Cinergy Financial emphasizes that by understanding how credit works, maintaining good financial habits, and making informed borrowing decisions, you can set yourself up for a stable and prosperous financial future.


The REALM strategy contains Alternative Investments which are speculative by nature and have various risks including possible lack of liquidity, lack of control, changes in business conditions and devaluation based on the investment, the economy and or regulatory changes. Alternative investments are not appropriate for all investors. No investment process is free of risk, no strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There is no guarantee that this investment model/process will be profitable. Diversification does not guarantee profit nor is it guaranteed to prevent losses.

 

Registered Representative offering securities and advisory services through Independent Financial Group LLC (IFG), a registered investment adviser. Member FINRA/SIPC. Cinergy Financial and IFG are unaffiliated entities.

author

Chris Bates

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