Money owed.
WHAT DEBT COSTS
Interest, and the obligation to repay regardless of circumstances.
WHY THAT SECOND POINT MATTERS
Repayments continue when income stops.
WHAT DISTINGUISHES DEBT
What it was used for What it costs Whether you can service it
WHAT DEBT CAN BE REASONABLE FOR
Something that increases your income or holds value Emergencies where no alternative exists
WHAT IT IS RARELY REASONABLE FOR
Consumption Maintaining a standard of living beyond income Repaying other debt at a similar cost
WHY THAT LAST POINT
Borrowing to repay borrowing without reducing the cost makes it worse.
WHAT TO ESTABLISH ABOUT ANY DEBT
The total to be repaid The interest rate The repayment amount and frequency What happens if you miss a payment Any charges and penalties
WHY THE TOTAL
The monthly figure conceals the true cost.
WHAT TO CALCULATE
What you will repay in total, against what you borrowed.
WHAT TO BE CAUTIOUS OF
Lenders who present only the monthly amount Charges added to the principal Rates expressed per month rather than per year Anything requiring collateral you cannot afford to lose
WHY MONTHLY RATES
They are far higher annually than they appear.
WHAT TO DO IF YOU HAVE SEVERAL DEBTS
List them: amount, rate, and repayment.
WHAT TO PRIORITISE
The most expensive, while maintaining minimum payments on the rest.
WHY
It reduces the total cost fastest.
WHAT TO DO IF YOU CANNOT PAY
Contact the lender before missing the payment.
WHY BEFORE
Arrangements are possible before default and harder afterwards.
WHAT TO AVOID
Ignoring it Borrowing more to cover it
