Debt

Managing Debt - What Is Debt?

Debt is any money that is owed or due to someone else.

(Definition from Bankruptcy UK)

Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds and six, result misery.
- Charles Dickens

Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.
- Ogden Nash

Never spend your money before you have it.
- Thomas Jefferson


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Why Is Debt Bad?

Are You In Debt?

What Is Debt Culture?

What Should I Do If Iím In Debt?

Why Is Debt Bad?

When you borrow money, you usually end up paying interest so you end up paying more than the original cost of the item. Owing money often spirals out of control very quickly and with the added interest, it is easy to end up owing more than you are able to pay back.

This can result in the following:

  • being taken to court
  • having the bailiffs sent to your property
  • losing your home
  • ending up in jail

Owing money can be stressful. It is far better to live within your means and wait and work for something that you really want. You will appreciate the value of it more if you have saved for it.

However, not all debts are created equal. Whilst debt is never a good thing, there are good types and bad types of debt. Or perhaps that should be bad debt and not so bad debt. Have a look at part 2 Ė Priority and Non Priority Debt for more information.

Are You In Debt?

What is the state of your finances?

Spend a few minutes doing the FSA Debt Test to see how you manage your finances.

What Is Debt Culture?

Our grandparentsí generation had a very different attitude to that of todayís society. They lived very frugally in comparison with the instant access to luxury goods that we tend to expect and demand as our right. Back then people were content with one coat and one pair of boots to last them through the winter and eating out was a rare treat.

Fast forward to today and we live in a world where people eat out regularly, buy new clothes for each changing season, and are surrounded by the temptation to purchase the latest mobile phone, the biggest TV and to go on luxury holidays.

Nowadays, every time you turn on the TV, there are adverts for luxury goods, new cars, new furniture, reassuring you that you can BUY NOW, PAY LATER. This is creating a debt culture of wanting everything NOW rather than waiting and working for something that you really want.

Donít be sucked in. Debt culture is created by large companies wanting to sell products and make money off you. They do not have your best interests at heart. Ignore the advertising and the pressure to own the latest gadgets placed on you by celebrity culture and magazines and remember the words of Charles Dickens:
Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pounds and six, result misery.

What Should I Do If Iím In Debt?

Working through this chapter will show you your options and help you get back in control of your finances.

You can contact the National Debtline for free and confidential advice and they have a series of excellent factsheets and packs that you can download to help you take charge again.