Do You Have Too Much Debt?
Various rules of thumb exist to help determine when debt levels are excessive. For instance, one rule of thumb states your total debt payments, including your mortgage and credit card bills, should not exceed 36% of your gross monthly income. The problem with rules of thumb, however, is they don’t take into account your unique circumstances. Look for these signs that your debt level may be getting too high:
- You have no money left over at the end of the month. If you have nothing left to save after paying your bills every month, your debt may be too high. Be especially concerned if you have to dip into savings to pay bills.
- You’ve reached your maximum credit limit. If you’ve maxed out your credit card limits or are considering obtaining new cards for additional credit, your debt may be getting out of hand. Credit cards should be used as a convenience, not to finance and unaffordable lifestyle.
- You’re only making minimum payments. Required minimum payments on credit card debt are so low, it can take decades to pay off the debt. It will be difficult to get your debt under control if you are only making minimum payments.
- You do not have an emergency fund. Ideally, you should set aside three to six months of living expenses in case of emergencies, such as a job loss, disability, or major home or car repair. If you can’t maintain that due to debt payments, your debt level is probably too high.
- You’re not comfortable. The ultimate test of whether your debt level is too high is your comfort with that debt and the payments that must be made.
If your debt level is too high, take steps now to get it under control. Please call if you’d like help with your debt.
Copyright © Integrated Concepts 2015. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.