By Olivia Wooster
Have you ever wanted to buy something, but didn’t have quite enough money? If you've borrowed money from friends, family, or anyone else and promised to repay them, then you are “indebted” to pay it back. This is called "debt."
Debt is money one person, organization, or government owes to another person, organization, or government. Typically, the person who borrows the money has a limited amount of time to pay back that money with interest (an additional amount you pay to use borrowed money).
Video introductions into debt part 1 & 2
why do we have debt???
People and businesses have debt because they need or want to buy something, but they don’t have enough money to pay for it at the time. Adults sometimes borrow a large amount of money to pay for a house, a car, college tuition, medical bills, or home repairs.
Credit cards are also a form of debt. If you purchase a pair of shoes by charging it on a credit card, you are in debt to the credit card company until you pay your bill. Businesses borrow money to help pay their employees and buy expensive items such as buildings, computers, and other large purchases.
15 signs of debt trouble
- Your credit card balances are rising while your income is decreasing.
- You are only paying the minimum amounts required on your accounts, or maybe even less than the minimums.
- You're juggling bills. For example, you apply for another credit card and use cash advances from it to pay an existing card.
- You have more credit cards than a successful gambler has poker chips.
- You are at or perilously near the limit on each of your credit cards.
- You consistently charge more each month than you make in payments.
- You are working overtime to keep up with your credit card payments.
- You don't know how much you owe and really don't want to find out.
- You have received phone calls or letters about delinquent bill payments.
- You are using your credit card to buy necessities like food or gasoline.
- Your credit cards are no longer used for the sake of convenience, but because you don't have money.
- You are dipping into savings or your IRA to pay your monthly bills.
- You are hiding the true cost of your purchases from your spouse.
- You're playing the card game by signing up for every credit card that sends you an unsolicited offer.
- You have just lost your job, or are fearful that you are about to, and are concerned about how you will pay all your bills.
How to get out of debt, steps.
1 - Stop increasing your debt.
2 - Record your spendings.
3 - Categorize your spending.
By doing this, you'll have a good idea of what you spend your money on, and you'll be able to figure out where you might need to cut back on spending. One of your expenses will be paying off your debt. You will want to always pay more than the minimum required, otherwise it will take an extremely long time to eliminate your debt. Paying only the minimum payment will equate to giving them 55% more than you actually borrowed.
4 - Make a budget based on your spending record.
5 - Figure out your debt paydown fund amount.
At the end of this exercise, you should have come up with a figure, a number of dollars that can be put toward debt paydown. Take note of this number. Day-to-day, if you don't want to keep taking note of all your expenditures, just write down what you spend in the categories you are trying to cut back. This will give you a very clear idea of how well you are going, and, if you know you're going to go over your budgeted amount, it may help you decide to hold back on a purchase.