Take the Pain Out of Paying
As you continue your journey toward financial well-being, consider the amount of money you currently owe. The sooner you identify exactly how much debt you have, the sooner you can make a plan to pay it off. The quicker you pay it off, the less you'll have to pay in expensive interest charges, and the more money you'll have available for meeting your financial goals.
Keep in mind that not all debt is equal. Some types of debt, including mortgages and student loans, are considered more favorable than others. That's because these loans potentially have long-term benefits, such as eventually owning a home or working in a profession that requires a degree. The least favorable kind is consumer debt, which stems from items that won't increase in value over time. It includes balances you owe on credit cards and other personal loans. Some consumer debt may be necessary, but too much can be detrimental to your financial future.
To find out how much consumer debt is reasonable for you, complete the following chart:
Yearly net income after taxes and deductions is $__________
Monthly net income is $__________ (yearly income / 12)
Amount of consumer debt per month that I should not exceed is
$__________ to $__________ (monthly income x 0.15; monthly income x 0.20)
Each month, I can afford to pay between $__________ and $__________ for my consumer debt.
Another way to tell if you have too much debt is to consider the warning signs listed below. Do any of these circumstances apply to you? If so, you probably should focus on a plan to reduce your debt. You should be concerned about your debt if:
- You spend more than 20 percent of your paycheck to pay off car loans, credit cards, or other types of consumer debt.
- You're borrowing to pay off other debts.
- You don't know how much money you owe.
- You make only minimum payments on each bill.
- You miss payments, or you pay your bills late every month.
- Creditors are calling you.
- You're being refused extended credit or additional credit.
- You borrow from retirement accounts or use credit cards to pay other monthly bills.
- You write postdated checks.
- You must take an extra job to pay your bills.
Take the Pain Out of Paying
As you continue your journey toward financial well-being, consider the amount of money you currently owe. The sooner you identify exactly how much debt you have, the sooner you can make a plan to pay it off. The quicker you pay it off, the less you'll have to pay in expensive interest charges, and the more money you'll have available for meeting your financial goals.
Keep in mind that not all debt is equal. Some types of debt, including mortgages and student loans, are considered more favorable than others. That's because these loans potentially have long-term benefits, such as eventually owning a home or working in a profession that requires a degree. The least favorable kind is consumer debt, which stems from items that won't increase in value over time. It includes balances you owe on credit cards and other personal loans. Some consumer debt may be necessary, but too much can be detrimental to your financial future.
To find out how much consumer debt is reasonable for you, complete the following chart:
Yearly net income after taxes and deductions is $__________
Monthly net income is $__________ (yearly income / 12)
Amount of consumer debt per month that I should not exceed is
$__________ to $__________ (monthly income x 0.15; monthly income x 0.20)
Each month, I can afford to pay between $__________ and $__________ for my consumer debt.
Another way to tell if you have too much debt is to consider the warning signs listed below. Do any of these circumstances apply to you? If so, you probably should focus on a plan to reduce your debt. You should be concerned about your debt if:
- You spend more than 20 percent of your paycheck to pay off car loans, credit cards, or other types of consumer debt.
- You're borrowing to pay off other debts.
- You don't know how much money you owe.
- You make only minimum payments on each bill.
- You miss payments, or you pay your bills late every month.
- Creditors are calling you.
- You're being refused extended credit or additional credit.
- You borrow from retirement accounts or use credit cards to pay other monthly bills.
- You write postdated checks.
- You must take an extra job to pay your bills.