Many people wonder how much debt is too much debt. It is truly a matter of perception. Banks will begin to consider you risky if you monthly debt minimum payments take up more than thirty six percent of your income. This would include your mortgage payment (or if you are renting your rent). The banks like you to stay within this amount, but is it truly in your best interest?
At some point if you continue to borrow money, you will reach a point where it becomes extremely difficult for you to meet your monthly obligations. At this point you may begin to seek help through a credit-counseling agency or you may begin to get serious about changing your spending habits. Hopefully you will begin to change before you reach this point.
It is important to remember that by controlling your spending now, you are allowing yourself greater freedom in the future. It is important to begin a plan to take control of your debt and to eliminate it. It is important to stop excessive spending, and begin to make wise choices about your wants and your needs. Many people do have emergencies come up, but through planning and saving; these emergencies generally do not need to be a set back for you.
The level of debt you are comfortable with depends a lot on your upbringing. If your parents were big spenders, and used credit cards you are more likely to do so. If your parents were careful with their money, and planned for big expenses you will be more likely to follow suit. In some cases you may do opposite of your parents, because you didn’t appreciate the extremes of their lifestyle.
You can decide if you are comfortable carrying a large amount of debt. It is important to remember that having no debt does not necessarily mean doing without. At the beginning you may need to limit your spending or purchase less expensive items. As you spend less money on debt repayment, and put more into savings you will find that you can actually purchase nicer items with your money since interest is working for you instead of against you.
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