Budgeting and Debt Management

Introduction to Personal Finance
An Overview for State Family Program Directors, Wing Family Program Coordinators, and Families.

Introduction

Evaluating Your Situation

Budgeting & Debt Management

Goals & Plans

Insurance & Disability Planning

BUDGETING AND DEBT MANAGEMENT

2.	Introduction
	2.1	Why Do We Acquire Debt?
	2.2	Debt Can Become a Habit
	2.3	The Reality of Borrowing
	2.4	The Credit Trap
		2.4.1	Fees
		2.4.2	Rates
		2.4.3	Types of interest
	2.5	Eliminate and Avoid Debt
	2.6	Trimming Your Budget
	2.7	Learning Check

2.3 The Reality of Borrowing

The reality of borrowing is the high cost of debt. Interest payments represent a double loss.

$ Compounded interest on the loan.
$ Compounded loss of earnings.

Our lives are riddled with stress. The nature of debt acts to compound that stress. We forfeit our flexibility when we borrow, and that is truly the highest cost of debt.

For each $100 interest paid monthly over 25 years at 10%, you have lost the opportunity to accumulate $124,000 in wealth.