Debt: It's All About The Numbers

: Chris Lee Law Firm

  Filed under: Debt

debtsRecent studies have shown that less than one-third of  Americans are financially literate. In other words, only one-third of us understand the importance of money management and have the skills necessary to keep ourselves out of financial trouble. This suggests that one of the main problems with personal debt in America is the failure to recognize when it becomes a problem.

Taking It To The Basics

There isn’t much we can do about our debts if we never actually recognize them as such. While the majority of us carry some degree of debt, not all debt is bad debt. A manageable amount of debt is actually a financially healthy habit, but it becomes a problem when debts put pressure on your monthly finances. Since everyone has a unique financial situation looking at raw numbers can only be done on an individual basis.

  • Look at your debts and calculate your debt-to-limit ratio, or the amount you owe compared to the total available limit on the account. Is this number more than 30 percent? If so, you should stop spending on this account immediately and work to reduce your balance to below the 30 percent threshold.
  • Look at you your required minimum payments on each account. Can you afford to pay more than the minimum payment? If the answer is ‘no’, you may need to consider increasing your income or debt negotiation to lower your interest rate.
  • Look at your monthly budget, including payments to all debt accounts and essential living expenses. Do you have enough income to cover all of these payments? If the answer is ‘no’, you may need to consider debt relief solutions or bankruptcy.


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