How debt can a person carry before it is too much?
Many Austin clients at Capital Budget Strategies, LLC, Austin’s Best Money Coach, ask this question. They always want to know if they are in “debt trouble.”
First you must understand there is “bad” and “good” debt. Bad debt is borrowed money spent on things that decrease in value. For instance, a new car will decrease in value immediately and usually can only be sold for less than cost. A vacation provides memories, though usually when the credit card balance is due!
Good debt is used to earn money. If you borrowed for an education, you will hopefully make more money. If you purchased a house, most likely it will increase in value.
Of course our Austin Financial Coach likes to see no debt, but our general recommendation is to keep “bad” debt to 15% or less of your gross income. This amount should be manageable. Therefore, if you make $50,000 you should not owe more than $7,500 in credit cards, car loans, personal loans, etc.
If your bad debt is between 16-40%, you should take drastic steps to get it under control. We suggest earning extra money by working part-time, having a garage sale, getting a roommate, etc. This amount of bad debt is dangerous and could quickly cause serious, long-term finanical problems.
If your bad debt is over 40%, consider meeting with a bankruptcy attorney or a non-profit credit counselor.
If you bad debt is under 40%, Capital Budget Strategies, Austin’s best Financial Coach, can help you set up a budget, create an emergency fund and develop a Snowball Debt Repayment Plan.
Our price of $149 includes our initial session (approximately 4 hours) and one follow-up session at the 1, 3 or 6-month mark to check your progress.
Meet with our Austin Finanical Coach and get back on the right finanical track.
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