Michele Cagan - Debt 101: From Interest Rates and Credit Scores to Student Loans and Debt Payoff Strategies, an Essential Primer on Managing Debt

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First Adams Media hardcover edition February 2020

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Library of Congress Cataloging-in-Publication Data

Names: Cagan, Michele, author.

Title: Debt 101 / Michele Cagan, CPA.

Description: First Adams Media hardcover edition. | Avon, Massachusetts: Adams Media, 2020.

Series: Adams 101.

Includes index.

Identifiers: LCCN 2019046051 | ISBN 9781507212660 (hc) | ISBN 9781507212677 (ebook)

Subjects: LCSH: Finance, Personal. | Debt. | Saving and investment.

Classification: LCC HG179 .C34 2020 | DDC 332.024/02--dc23

LC record available at https://lccn.loc.gov/2019046051

ISBN 978-1-5072-1266-0

ISBN 978-1-5072-1267-7 (ebook)

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From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations

If youre like most people, the word debt can sound scarybut it doesnt have to. The truth is that debt will probably play an important part in your life, and as youll discover, there are ways to use debt to your advantage. In this book, youll find information about:

• The difference between good debt and bad debt and why, in some circumstances, it makes financial sense to borrow money and invest in your future (mortgages, student loans, and business loans, for example)
• What secured debt is and why it generally has lower interest rates than unsecured debt
• The best ways to make payments on different types of debt

Once you know more about debt, it will be easier for you to evaluate your own finances and figure out what to do about them. The information in this book will help you as you create a road map to financial security. Debt 101 shows you how to design a personal path leading to that goal; along the way, youll learn how to form a plan for dealing with different kinds of debt. Sometimes that plan includes cutting back on expenses and getting rid of drains on your finances. Other times, it means finding new income streams, such as side gigs; investing in rental properties; or other ways of bringing more money into your household. Youll be able to achieve financial security and freedom by understanding the best ways to borrow money, matching your expenses to your income, and saving for the future.

Dealing with debt head-on will help take anxiety out of your money management. You can get rid of the stress that comes with facing your monthly bills and build up savings to cover emergencies, goals (like buying a house or going on vacation), and retirement. The financial confidence that comes with understanding debt will help you overcome challenges that have been keeping you from getting ahead and accumulating a healthy nest egg.

To know when its smart to take on good debt and how to rid yourself of bad debtwhether its an excessively high mortgage payment, personal or payday loans, or credit cardsyou need to set a clear course. Debt 101 will help you get wherever you want to go.

A loan, at its most basic, is borrowed money thats expected to be paid back in the future with interest (extra money). Loans usually come with more rules and features than this simplified version, but at heart, theyre just promises to return something.

Every loan has two sides: a lender and a borrower. The lender gives something, usually money, to the borrower. The borrower agrees to give back what she or he borrowed plus a bonus (whether thats extra money, an extra goat, or five days of labor) for the lender.