Financial
Debt problem – reviewing income and expenditure
A review of personal finances is basic step in becoming debt-free. Personal debt problems come in many varieties so it is critical that both income and expenditure are reviewed to identify priority debts. Priority debts include mortgage payments, rent, utility bills etc. Non-priority debts include credit card debt, unsecured loans, personal overdrafts and hire purchase agreements. But many individuals with debt problems are tempted to pay smaller personal debts first, but this can worsen money problems. One needs to scale how bad their debts are, sizing your debt problem isn’t everything. What counts most is your debt in proportion to your ability to repay. Even if your debt is manageable, if you don’t know where it came from, that’s a big danger signal. If your non-mortgage debts are more than a year’s salary after tax, then they’re quite severe; after all, that means you’d need to work more than a year to repay them, even if you had no outgoings.