Do You Need Debt Help?
It is so easy to live in denial and just try not to think about how much debt you really have. Maybe you think that if you ignore it then you won’t have to deal with it. Or maybe you don’t even know how much you owe. Do you need debt help? If you aren’t sure, keep reading to find out.
The first thing you need to do is find out how much you owe. Gather your statements for every credit card, loan agreement, student loan, line of credit and personal loans from friends or family that you owe. Add up the dollar amounts from the total on each statement and find out how much you owe altogether. It is always a good idea to know how much you owe. If you don’t know this, you can end up living in a fairy tale, believing that you are better off than you are. If you don’t realize how much you owe, it is easier to spend money that you do not have.
Secondly look at what the fixed monthly payment or minimum monthly payment is for each debt and add them up. Include your mortgage or rent in this category. For loans from a financial institution you will most likely have fixed payments each month. Your minimum payments on your credit cards may change from month to month depending on how much you owe and how much you paid or spent the previous month. Add up each debt and make a total of what you pay each month.
Next take the total amount of money that you gross each month. Include your spouse’s income as well as any additional income you may have. Add it all up to show your total family income.
Take your total debt payment amount and divide your total income into it to get your debt to income ratio. For example if your total income was $5000 and your total monthly debt payment was $2000 your equation will look like this: $2000/$5000 = 40%.
If your debt to income ratio is below 36% you are within the healthy range. If you are between 37 and 49% it may still be manageable but you might be feeling quite tight and may not have enough to save or do the things that you want to do. Or maybe you are just managing your debt and not really paying it off. If your debt to income ratio is above 50% then you need debt help.
If your debt to income ratio is above the healthy range of 0-36% then it is a good idea to consider your options and make a plan to get yourself into the healthy range. Debt consolidation for example, is a great way to make progress with your debt by grouping all of your debts into one monthly payment. You often can reduce your interest rate which in turn lowers your payment and decreases the amount of time it will take you to pay off your debt.
If you would like to learn more about debt consolidation or just need debt help, give us a call at 4 Pillars Lethbridge at 403-332-7361. We offer a free one hour consultation either by phone or in the office. We will go through your financial situation with you and present you with the best options for you. There is no pressure and we always look out for your best interests.
