Tuesday, 23 April 2013

The danger of debt...

We have to consider the dangers of debt. For some this is a painful reminder of reality and how difficult it can be to get out of debt because it has to be paid for. If you don’t step in quickly, debt can spiral, so it’s important to open your eyes, take responsibility and plan to get out of debt.

Monthly income - £1580. Monthly expenditure - £1650. Overspend - £70. When I moved from my big salary to a small salary I found that because there are amounts going out all the time it is difficult to know exactly where you are at any point in the month. You can be overspending and not realise for a couple of months if you don’t keep a close eye on things. Let say this pattern carried on for 6 months. At the end of each month you realise the monthly trend but it is steadily going the wrong way - and at this point it starts to touch our emotions because making tough choices to not buy things starts to impact us – and family members. Without clear action, six months later it would be possible to be around £400 in debt. We have had people in our church who have been thousands in debt, some to the tune of tens of thousands, so this example is not unrealistic.

If you are in debt, at this point it is time to decide that you want to do something about it. You don’t want to live like this anymore, but if you have been paying for items on your credit card you now have to pay interest on that debt. By the way, the credit card is the worst way to manage debt because of the high rates of interest that are charged. The cheapest way is to get a bank loan - if it’s possible - or transfer to a 0% rate credit card company who are keen to have your business, and then ensure that you pay off the debt in the relevant period. Otherwise you will be paying somewhere around % for your debt on a credit card. And you need to be paying more than the minimum monthly payment in order to make clear inroads into the actual debt.

This series is based on the content of the annual Stewardship seminar from King's