Debt: The simple Q & A

MONEY & Legal Matters answered a few questions to help you get your head around how you could get into debt, and what options you have to get out of it.

Q: How do I know if I am in over my head?

A: Basically, you’re in over your head if you don’t have the money to meet your debt repayments, and your expenditure exceeds your income. Essentially, you are living on credit – cards, accounts and loans – and not on your monthly salary. There is, however, hope.

Q: What are the most common causes of bad debt?

* Budgeting badly

* A large lifestyle change (i.e. divorce, retrenchment, illness)

* Putting short-term debt (e.g. credit card debt) onto your list of long-term debts (like your home loan) to increase your cash flow.

* Reckless lending to people who don’t repay you – leaving you in debt.

Q: Help! What can I do?

A: Fortunately, there are credible, reliable, professional agencies that focus on relieving financial problems. “We then provide an easily-managed financial plan with two main objectives: to minimize your debt and clear your name – leaving you debt free within around 18 months,” says Anba ‘Paddy’ Padayachee of Money & Legal Matters.

Q: What is the difference between debt, and monthly expenses?

A: Debt is money that you have borrowed, and would later need to pay back in a certain amount of time (usually with interest). Your monthly expenses are items such as school fees, domestic staff salaries, petrol and groceries. These are things that are paid for in cash, and usually on the day the product or service has been provided.

Feeling inspired?

Look out for our next Money & Legal Matters article, where one man’s life went from “desperate and in debt”, to “reinstated and relieved” by approaching a professional debt management consultant.

Anba ‘Paddy’ Padayachee is the  CEO of Money and Legal Matters. Contact him at Mlm1@telkomsa.co.za