OVER EX­TENDED

SHE Carribean Magazine - - BASIC CENTS -

left with $200 a month, But what hap­pens if you are faced with an un­fore­seen cir­cum­stance like need­ing a re­place­ment part for your ve­hi­cle or your roof be­gins to leak? If you don’t have suf­fi­cient funds in your sav­ings, you may have to bor­row money to pay th­ese es­sen­tial debts and sud­denly find all of your in­come has gone to­wards pay­ing loans.

Bor­row­ing re­spon­si­bly is es­sen­tial for you and your fam­ily, be­cause if you have no money left over each month for en­joy­ment, you will be living from one pay-cheque to the next, just to clear your debts and pay your monthly ex­penses.

Most banks and lend­ing in­sti­tu­tions have fixed cri­te­ria of how much you should be spend­ing on loans as a max­i­mum of your in­come. The fig­ure varies be­tween 30% and 45% of your earn­ings af­ter tax and in­sur­ance. To bor­row more money than this could be said to be ir­re­spon­si­ble be­cause you will have no room for ma­neu­ver should an un­ex­pected fi­nan­cial prob­lem arise.

When your in­come is steady, you can es­tab­lish a max­i­mum amount you are pre­pared to pay to­wards loans and other ex­penses so that you can guar­an­tee that you have some money left over for en­ter­tain­ment and some redi­rected to your sav­ings ac­count for fu­ture plan­ning.

It is crit­i­cal to un­der­stand the chal­lenges aris­ing from overex­tend­ing your fi­nances. By pru­dently and re­spon­si­bly man­ag­ing your fi­nances, you will find ways to live within your in­come and en­joy your life, be­cause you will have bud­geted and planned for cir­cum­stances that you may be faced, ex­pect­edly or not.

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