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In the question asking whether financial budgeting can help individuals avoid debt, Statement 2 reads:
"To avoid taking out loans, individuals should practice responsible budgeting, enabling them to save for emergencies and achieve financial stability."
At first glance, it seems to suggest a causal link: budgeting → saving → avoid debt. However, I see several potential flaws in treating this statement as sufficient on its own:
"To avoid taking out loans, individuals should practice responsible budgeting, enabling them to save for emergencies and achieve financial stability."
At first glance, it seems to suggest a causal link: budgeting → saving → avoid debt. However, I see several potential flaws in treating this statement as sufficient on its own:
- Saving does not necessarily require budgeting. Some individuals might save money without following a formal budget, so the link between budgeting and saving isn’t guaranteed.
- Emergencies aren’t the only reason people take loans. Even if someone budgets and saves, they might still incur debt for medical expenses, education, investments, or lifestyle needs. What if amount required in emergencies exceeds that of saving and result into debt. Further to this note, does only emergencies result into debt?
- Avoiding loans ≠ financial stability. Some individuals may take loans strategically and remain financially stable, so avoiding loans doesn’t automatically equate to avoiding debt problems. At times, loans would help save money (in the form of tax credit) which inturn would help reduce the debt rather than increase it.
Given the normative nature of statement, I believe there are too many assumptions that need to be assumed before it works, thus, statement (2) alone is SUFFICIENT seems a little doubtful.
GMATinsight
