D E B T M A N AG E M E N T

CHAPTER 4, SECTION 5

I CAN…

• Analyze a credit card account when minimum payments are made.• Calculate debt-to-income ratio.

WHAT IS DEBT?

• Using someone else’s money with the promise to pay it back. • Credit cards are a form of debt. • Example 1 & 2, p. 154• Check your understanding A

WHAT’S A DEBT-TO-INCOME RATIO?

• A % that indicates the percent of one’s income spent on debt.• Debt-to-income ratio=Debt payments/gross

income• Example 3, p. 156

HOW CAN I REDUCE/MANAGE MY DEBT?

• USE CASH!!!• Avoid high interest rates!• Pay more than the minimum payment.• Pay off high interest credit cards first!• Debt counseling• Consider a consolidated loan (all your debt is

combined into one loan—must find a low interest rate).

LET’S PRACTICE!

• P. 158-159, 7-19