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Sort Out Your Family Finances: Dealing with debt

by Bob Reeves

Debt is not necessarily a bad thing. For example, many people aspire to get a mortgage so that they can get on the housing ladder. This is a debt, but is seen as a necessary one and it should make you better off in the long run.

However, debt can be a bad thing once it gets out of control. Debt crisis is the point where you can no longer afford your monthly repayments. This can creep up on you. For example, you have a mortgage and then you take a loan for a car. At the same time your two credit cards are getting near their limit and you have a store card. All of these debts need servicing which means regular amounts coming out of your salary for the repayments. This situation can be perfectly fine. You borrow the money and pay it off and in the meantime you have the things you want.

However, it can turn bad, particularly if you get a change of circumstances. For example, if interest rates go up many of your monthly payments might well follow. Equally likely is a change in your personal circumstances. Perhaps you start a family and your income drops. Perhaps the worse happens and you get made redundant or have your hours reduced. If anything like this happens, you suddenly find that the monthly outgoings that you could afford are now too expensive.

The key to borrowing is to make sure that you can afford it now but also in the event of a change of circumstances. If you do get into debt crisis, tackle it straight away by contacting all the companies you owe money to and explaining the situation.


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Sort Out Your Family Finances: Teach Yourself

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