Do You Know How Much Debt You Have?
Recent statistics from the Federal Reserve show that revolving debt has risen by $8 billion, thereby increasing the total of credit cards debt to $870 billion. Adding to this are consumers increasingly using their credit cards for purchases.
With a job growth that is weak, wages stagnating and consumer confidence decreasing the amount of debt attributed to credit cards is the highest since November 2007. This is a matter of concern as consumers burdened with credit card debt have the potential for losing control of it as the burden of the debt grows,
Monthly repayments increase and the amount owed keeps growing. Suddenly, almost without warning your manageable bill for credit cards is transformed into an uncontrollable asset devouring parasite,
If you are confronting a position where your credit card debt has the potential of running away from you, start considering your personal debt to income situation. This will give you an accurate means of control over your spending and opportunities of reducing it and regain control of your debt burden.
The first stage in your financial control mechanism is to determine your debt to income balance. Therefore, calculate your total income, including all family earnings and any government grants and other financial income. This is followed by calculating the total of your monthly financial obligations. For example; mortgage or rent, car and loan payments and any other debt related commitments like food and utilities.
The exercise is then to divide the total of your monthly debt by the monthly income and multiply the balance figure by one hundred which determines your financial position. Various indicators related to your financial standing are that if your debt to income ratio is below thirty six percent, your financial position is regarded as good. Therefore, maintain this level and consider further investments and savings.
If the ratio is between thirty seven and forty two percent, it is acceptable. However, find ways of reducing the debt factor, which could be achieved by increased monthly payments. A debt to income ratio of fifty percent or more shows a financial crisis and help should be sought from a qualified counselor.
Control your credit card debt factor by paying more than the minimum payment and set priorities of reducing, spending on frivolous or unnecessary items and activities. A critical aspect is not under any circumstances; apply for new credit cards or loans. An effective method to reduce your debt balance is by giving preference to paying the bills with the highest interest rates.