“Never a borrower or a lender be!” is an old saw that continues to perpetuate itself amongs those who fear or are victims of abusive borrowing behavior: that’s right I have coined a new term, and now I can have an acronym to go with it: ABB.
What is ABB?
ABB is simply the overborrowing of money to the point that the repayments no longer constitute a minor expense in your salary. Some would say that any single installment in excess of 10% of your net salary would be excessive. I’d go even further than that. In excess of 5% on a single source of debt would constitute the first symptoms of ABB. If you have multiple borrowings, then a total of more than 5% could signify problems ahead. Naturally, mortgages and car loans (if they are reasonable proportions or your net salary would be exempt from this).
A crash course on debt management would be in order. First you need to take action to find out the sources and rates of interest on your borrowings. Second, you will need to take some difficult decisions on cutting back your expenses, paying down high interest loans or credit card debts as quickly as possible, negotiation moratoriums on repayments if necessary, and refinancing other debts through the use of cheap secured loans, for example.
When you start a treatment with your doctor, compliance can be an issue: taking the medication on time, keeping appointments with the doctor, following additional instructions, etc.. This can be a burden, but your health is at stake. Similarly, once your program of debt treatment begins, you need to make sure that you follow your program through to the end. You need to maintain your get-out-of-debt program, otherwise you are sacrificing in vain, and your financial health is at stake!
How NOT to manage things
I found after I came back from the U.K. last year that I had some got nearly NT$200,000 (about US$6500) in debt, through travel costs, hotels, trains, plains and automobiles. Of course I had budgeted much of that money already for the trip, so it was no surprise. However, I ended up paying way too much credit card interest on the amounts, simply because I didn’t figure things out well enough in advance, didn’t stick with my plan of paying things off quickly, and was basically lacking in self-discipline.
It’s important that you set goals in managing your debts, keep working towards those goals, and deal positively with the setbacks! You don’t want to discourage yourself because of your mistakes!
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