Nobody would want to be in debt, but sometimes it is necessary to take on a loan to enhance liquidity or solve some problems. This means if you are disciplined and see the value of money, you will be able to pay your debt in time, and “debt” is not a bad thing. But if you are a “spendthrift” that has a tendency to create more debt, you might not be able to pay off your debt. The more your debt is, the longer it takes to clear them.


Lacking financial discipline is an important factor that can lead to debts. Debtors are usually people who are not careful when spending. They have a lifestyle of a spendthrift and prioritizes their social status. Also, they lack the ability to estimate their own buying power.


Is it possible to be a “safe spender” before “spendthrift” by creating debt in the appropriate amount? To control the debt ceiling in the appropriate amount by considering how much debt can be owed and the amount should not exceed the annual income and how much of the installment should not exceed the monthly income. This debt ceiling control rule is called “20 – 10 rule”.

1. Do not loan more than 20% of annual net income

Example

• Receive a monthly income: 20 000 baht or 240 000 baht per year
• Pay for the duty: 7 500 baht per year
• Remaining net income: 240 000 – 7 500 = 232 500 baht per year (19 375 baht per month)
• 20% of annual net income = 46 500 baht

This means debt should not exceed 46 500 baht per year.

Majority of this type of debt is usually a debt created for consumption or convenience such as credit card, shopping, mobile phone, memberships, car loan etc. This debt, thus, does not include housing loan or education loan.

        

2. Do not pay installment more than 10% of monthly net income

Example

• Remaining monthly net income: 19 375 baht
• 10% ของรายได้สุทธิต่อเดือน = 1,937 บาท

This means debt installment should not exceed 1 937 baht per month. This type of debt is usually created for consumption or convenience and does not include housing loans or education loans.     

To effectively control the debt ceiling, you need to classify the types of debt well. The types of debt are debt that will bring about profit in the future and debt that will not create any benefit such as debt created for consumption and convenience. When you know about this type of debt, you will then be more careful about spending. To effectively control the debt ceiling, you need to classify the types of debt well. The types of debt are debt that will bring about profit in the future and debt that will not create any benefit such as debt created for consumption and convenience. When you know about this type of debt, you will then be more careful about spending.

The kind of debt that should be created is the debt that will bring about future profit.

1. Debt for housing 

Debt for housing is the debt that will create long term stability for you and your family. Once you pay off all the debt, the house becomes your property.

2. Debt for education 

Debt for education is the debt to build the future. When you are educated, you are more likely to see the opportunity to earn more or improve whatever you own.     

3. Debt for business 

Debt for business is the debt that will bring about future income such as taking a loan to buy machinery for business.

After knowing what kind of debt should be created, you have to know how to manage them effectively as well.

1. Appropriate debt amount

This means you should know the amount you earn and should know the appropriate amount that you can be in debt that it will not bring you and people around your troubles.

2. Do not run

When it is time to pay the debt, you should pay punctually in the amount that you should pay. If you can follow this, you will have a good record and next time, if you need to take a loan, it will not be hard for you to get approved.

3. Regularly check

When you are in debt, you should regularly check on your debt to always be aware of how much you still owe. You can record down the creditors, the amount you owe, interest rate, outstanding amount, due date as well as other conditions.

4 .Classify debts

You have to classify if the debt you owe is a good or a bad one. Then you should owe less of the bad debts and when you are clear of all debts, you should not create any more debts.

Nowadays, being in debt can happen easily. Therefore, if you change your spending behavior and classify your debt, control your debt ceiling well as well as manage your debt, you and people around you will not be troubled by your debt.