Debt Management Series: Introduction to Managing Your Debt

Top tips for Managing Your Debt

“Never a lender, nor a borrower, be” – wise words from Will Shakespeare which may have been relevant in his time, but in this day and age it’s almost impossible not to go into debt at some point in your life… unless, of course, you’ve mastered the art of alchemy!

Managing Your Debt

Not all debt is bad or unmanageable, but the key to surviving a swim with the sharks in the current sea of credit cards, loans and payday lenders, is knowing which arrangements are a sensible, calculated risk and which ones to avoid like the plague in order to manage your debts effectively.

So, What Is Debt?

Technically speaking, you’re in debt anytime you borrow money from someone, right up until the moment you pay it off, including any interest owed.

This applies to overdrafts, credit cards, payday loans, personal loans, interest-free payment plans, securing a mortgage on a property or borrowing a fiver off a mate.

And What Is Interest?

This is the additional amount you agree to pay in order to borrow the money. Typically, longer term loans offer lower interest rates, whereas shorter term loans can get away with exceptionally high rates.

Interest is usually expressed in terms of APR (Annual Percentage Rate) which takes into account the compound interest rate plus any other fixed charges connected to the loan.

But this APR only needs to be offered to 51% of successful applicants which could mean that you end up on a very different rate to the one actually advertised.

Currently, you could be looking at a personal loan with an APR of 4-8%, a credit card at 20-40% and a payday loan of 1220% – even if maths is your nemesis, hopefully you can see that the payday loan is the significantly more expensive option.

If you are ever in doubt as to whether or not a particular deal is good, consult as a point of reference – they can help compare similar products to make sure you get the best deal.

Is All Debt Bad, Or When, If Ever, Can It Be Good?

Being in a debt has become a bit of a dirty word since the influx of less-than-reputable lenders, but there are plenty of times when it’s ok to go into debt, particularly if it’s enables a means to an end.

If there is a sound, logical argument which improves your overall position in the long run, then debt can be considered to be a calculated risk which is worthwhile.

Prime examples of this would be a mortgage or a student loan: most people can’t afford to buy a house outright, or fund several years of university tuition, but the end result – getting on the property ladder or achieving a qualification – means the debt is justified as you will ultimately be bettering your position.

Acceptable debt isn’t just confined to such big, life changing purchases: if your car breaks down and you don’t have enough money to get it fixed, but you need it to get to work, then putting the bill on a credit card or dipping into your overdraft would make sense.

Likewise, if you are investing in yourself by studying i.e. taking a student loan or investing in a piece of kit to help you earn more money – such as a laptop or electric tools  – will pay off in the long run.

These are easy examples of when going into debt is worthwhile, but you’re likely to face less obvious choices on a regular basis.

Most of us can make a convincing argument for buying something we covet even if we can’t really afford it, but the best way to establish whether or not the debt is worthwhile, is to think about its use over the length of the borrowing.

1. If you’re talking a couple of hundred pounds for new suit to wear to job interviews, which can be paid off within 6 months, without incurring much interest, and which will ultimately secure you a better, higher paid job.

Then it could be a cost effective investment, as you will wear the suit for years to come and it will have paid for itself.

2. If, on the other hand, you are on a shopping spree and fancy some make up, a couple of high street tops and a pair of fashion heels for a night out, then the items are likely to be used or discarded within a few months, long before you’ve paid for them, let alone the high interest on a store card, and so this would be considered an unwise investment.

3. And if you need some help getting out of debt and getting your finances back on track, my eBook: How to Get Out of Debt and Stay Out Once and For All is the best place to start!

In this guide, I’ll show you EXACTLY how I paid off over £32K of debt in just two years and how to stay out of debt forever.

You will learn how to get out of debt fast even when you are living from paycheck to paycheck on your own – starting now!

Click here to start getting out of debt and get the life you really want!

Always remember that the most difficult part of getting out of debt is getting started!

Over to You

Throughout the debt management series of articles, we will look at the various types of borrowing, alongside the good, the bad and the ugly lenders, but first you need to identify all your sources of debt as you learn how to manage your debts better.

Do you have credit cards, store cards, car finance, interest-free credit on furniture, a personal loan or a mortgage? Do you regularly dip into your overdraft, borrow off friends and family, or take short payday loans?

Do you have a travel loan from work, have an attachment of earnings order or student loans deduction? In order to tackle and manage your debt head on, you have to be brutally honest with yourself and acknowledge every penny you owe, in every form.

Only once you have a handle on your level of borrowing, can you work on managing your debt effectively. So, grab a cup of coffee while you sit down and work it all out, then browse through our helpful articles to plan your next steps.

In the coming weeks, we will be looking at different aspect of debts so be sure to sign up so you can keep up with the latest articles of the series.


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  1. Thank you for sharing; this has already started helping me put my act together. I look forward to reading the other articles in this series.

  2. I really like the comparison of going into a bit of debt to buy a new work wardrobe versus a shopping spree. That’s a really good point to be purposeful. Even the “good” debt of my mortgage makes me a bit anxious, so we’re trying to pay it down faster. In terms of houses and colleges being good debt, I’d say they are…usually. As long as it’s not too much house and it’s a sensible school, then it’s fine. But I have a quite a few friends who took on “good” debt and are now completely housepoor.

    1. I completely agree wit you Penny. It reminds me of the quote above “Never a lender, nor a borrower, be”.

      Going into debt isn’t always the best solution but never the less it is important to learn how to manage these debts effectively in order to avoid being house poor.

  3. My experience of debt has left me with a few scars! My husband and I didn’t manage our debt (credit cards and loans) well at all for 15 years. We finally got into the right money mindset and became debt free (except for a mortgage on a rental property last November).

    Now, we’re very reluctant to get into debt again, although we will consider taking on a mortgage to buy a house of our own again in the future. That’s probably the only debt that we’d be comfortable with.

  4. I like that you used the term “acceptable debt.” There really are some things we just can’t avoid, but it doesn’t make being in debt any less painful or frustrating! It is hard to call my student loans “good” debt when they are larger than my yearly salary, even though I know they got me into the career I enjoy.

  5. Debt is miserable, but it definitely taught me more about personal finance than anything else in my life.

    1. I completely agree with that statement. It also gave me the wake up call to take control of my finances.

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