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The Wise Investor

sound business-like, although her face was quite red. "Still,
that won't be enough to pay all my debts. Besides, it always
made me feel good having the cash squirreled away in that
other account."
"In a way, Kate, that is an illusion. A person with 5,000 in
cash and 3,000 on a credit card has exactly the same wealth
as a person with 2,000 in the bank and no debts. However,
you are right in one respect. Once a lump sum of money is
dissipated, it is difficult to have the discipline to save and
rebuild it. If you cannot save a fixed amount from each pay
packet, though, you will not achieve that things you have
been asking me about anyway."
John sat in silence for a few moments, contemplating the
information that Kate had just given him. It was worse than
he had thought, and Kate could not even repay her short-
term credit with her cash assets.
It was, he thought to himself with grim humour, what one
could call a 'challenging situation'.
"Time for the next strategy, my dear," he said brightly.
"Rearranging your finances can be a hassle, but once you
get things under control it will be a whole new ball game.
Next, you should investigate refinancing and consolidation
"Consolidation loans?" said Kate. She had no idea what
he meant.
"A consolidation loan is simply a loan you take out to pay
off several smaller loans," said John. There are several
reasons you should do this.
Firstly, many forms of credit have high rates of interest.
By taking out a single personal loan, you can pay off several
other loans and have a lower rate of interest.
Secondly, you will have a fixed repayment period. With
credit cards, the balance usually goes up and down as you
spend and make payments.
It is hard to set yourself a schedule to actually repay the
whole amount. In fact, you would probably never pay it off