Are you in debt? For most of us, the answer is a simple "Yes".
Whether it's a mortgage, a credit card debt, a student loan, a hire purchase agreement, an overdraft - debt plays a fundamental role in modern life, and very few people can say they have no debt at all.
"Are you in too much debt?" would be a more important question - but it's also much harder to answer.
Responding to this question requires a detailed assessment of your finances: not just what you owe, but what you own, what you earn, and how much you need to spend every month on everything from your mortgage/rent to your utility bills, petrol and payments to your unsecured debts.
After all, someone with a £10,000 credit card debt will find it much harder to cope than someone with a £5,000 credit card debt - but only if they're in approximately the same situation.
If the first person earns a great deal more and/or has much lower expenses to deal with, they could well be in a better situation to deal with their debt.
If you're wondering whether you're in too much debt, it's good to talk to a debt adviser, who can help you go through your finances and decide whether or not your debts are a problem.
Are you in too much debt? First of all, it's important to understand the difference between priority debts (from mortgage/rent to utility bills and child maintenance payments) and non-priority debts (everything from credit cards and overdrafts to unsecured loans and store cards).
1) Write down everything you owe - and add it all up.
If it's less than 3 months' take-home pay, you're probably on top of your debts.
Even so:
If you'd like some advice on doing this, or on any of the other points in this article, you should talk to a debt adviser.
Whether it's a mortgage, a credit card debt, a student loan, a hire purchase agreement, an overdraft - debt plays a fundamental role in modern life, and very few people can say they have no debt at all.
"Are you in too much debt?" would be a more important question - but it's also much harder to answer.
Responding to this question requires a detailed assessment of your finances: not just what you owe, but what you own, what you earn, and how much you need to spend every month on everything from your mortgage/rent to your utility bills, petrol and payments to your unsecured debts.
After all, someone with a £10,000 credit card debt will find it much harder to cope than someone with a £5,000 credit card debt - but only if they're in approximately the same situation.
If the first person earns a great deal more and/or has much lower expenses to deal with, they could well be in a better situation to deal with their debt.
If you're wondering whether you're in too much debt, it's good to talk to a debt adviser, who can help you go through your finances and decide whether or not your debts are a problem.
Are you in too much debt? First of all, it's important to understand the difference between priority debts (from mortgage/rent to utility bills and child maintenance payments) and non-priority debts (everything from credit cards and overdrafts to unsecured loans and store cards).
1) Write down everything you owe - and add it all up.
- Do include all your non-priority debts.
- Don't include your mortgage or any other debt secured on your home.
- Do include any arrears on your priority debts.
- Don't include your latest bills for your priority debts - the ongoing cost of your mortgage/rent, utility bills, etc.
is basically a living expense, like food or petrol, so you shouldn't include it in your calculations here.
If it's less than 3 months' take-home pay, you're probably on top of your debts.
Even so:
- it's important not to get complacent, as your debts could grow a lot faster than you realise, and
- it's still worth trying to pay off whatever debt you can, as this will mean you're paying less in interest, and
- your debt could become dangerous if your income dropped, as it would then be larger in comparison with your income.
- try your best to repay whatever you can, and
- avoid taking out any more credit - at least until you can reduce your total debt so it's less than 3 months' take-home pay.
- avoid taking out any more credit, and
- focus on repaying your debt.
If you'd like some advice on doing this, or on any of the other points in this article, you should talk to a debt adviser.
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