Understand the Nature of Debt
We live in a time and culture that promotes going
into debt as an acceptable financial choice. Most Americans
use credit as a regular purchasing tool. More people
are further in debt than ever before and average household
debt has reached historic records.
Every time you use a credit card or take a payday advance,
you are borrowing money. If you borrow money a lot,
you risk getting too far in debt. Often, debt is the
end result of poor financial planning because you don’t
realize how much you are borrowing, and your debt gets
out of control.
Lacking proper money management skills and discipline
is one of the main reasons why so many people suffer
financially. You must understand what debt is, the difference
between good and bad debt, and how to work with debt.
It is important to realize what debt really costs you,
how to handle money, and how to keep debt manageable.
Don’t let debt take over your life, financially or emotionally.
- Frequent causes of debt
- Overspending
- Reduced Income
- Death in the Family
- Unemployment
- Medical Expenses
- Separation/Divorce
- Warning signs of too much debt
- Debt to Income Ratio: An old and respected rule
of thumb holds that monthly payments on debts (excluding
a home mortgage) shouldn't exceed 20% of your net
(take-home) pay. The nearer you get to that 20% maximum,
the greater you risk becoming over-extended and too
far in debt.
- Personal traits that lead to debt
- Secured vs. Unsecured debt
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