Hidden Debt – Do You Have Any?

As I have helped people prepare hundreds of budgets, I realize that debt is sometimes hidden from people.

Let me give you an example.

One of the first things I ask when helping a person prepare a written budget is "How much is your take-home pay?

They tell me a number, and we start applying the famous equation:  INCOME – OUTGO = EXACTLY ZERO

Everything is proceeding smoothly until we get to the debt column.  The "revealing" of the hidden debt happens here.

The statement is made, "I have a 401(k) loan, but it is taken out of my paycheck.  Should we include it here?"

The 401(k) loan is taken from their paycheck before it ever gets to them.  Ever hear the saying, "Out of sight.  Out of mind."?

I usually adjust the "Take-Home Pay" by the loan payment amount and then include the payment in the debt column.

Here are some common "Hidden Debts" that I see:

  • 401(k) loans
  • Overdraft loans
  • Car payments
  • Company loans

These hidden loans are "Out of sight.  Out of mind."  Yet they are eroding one's ability to win financially.

Expose the debts to daylight and ATTACK them! 

Oh, by the way, you ought to list out all of your paycheck deductions and see how much you are paying annually for each one.  When you see how much you are paying in taxes, it will ensure that you vote every single time you have the opportunity!!!

You can start your written spending plan by using one of the FREE easy-to-use forms on the TOOLS page. 

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  1. Saving Freak on November 28, 2007 at 7:06 am

    I have none of my income taxes withheld throughout the year. It is painful every month to calculate my taxes and put it into a high interest savings account. Once you start doing this it is obvious why the government wants taxes withheld instead of having people pay them. There is no way we would still have an income tax if this were the case.

  2. Fiscal Musings on November 28, 2007 at 3:09 pm

    It’s always a good idea to have a clear picture of your financial situation that includes and debts that you have. That sounds awfully like a balance sheet to me: a list of your assets and of your liabilities. It’s not that difficult. It’s just a list…

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