Thursday, March 31, 2011

Debt Diet eCourse: Debt Diet Week 3: Assess Your Debt 3/6/11



From LaToya Irby, your Guide to Credit / Debt Management
Many debt plans jump right into debt assessment and repayment. I saved it for a couple of weeks because I believe you have to face the things make you create new debt before you can actually pay off debt. Once you've eliminated the desire and need to take on more debt, you'll be in a better position to face your debt.This week's objective is to create complete the Debt Tracking Worksheet discussed in How to Add Up Your Debt.
How to Add Up Your Debt 
This might be the most painful part of debt diet. It's the equivalent of getting on the scale and checking your weight. It's also a critical part of the diet since it lets you know exactly where you stand.
Warning Signs of Too Much Debt 
Even before you look at the numbers, there are some sure signs that you have more debt than you can handle. Use these signals as a way to know it's time to scale back on your debt.
How Much Debt is Too Much 
No one can say with certainty that $1,000 or $40,000 is too much debt because it depends on your individual situation. You can tell whether you have too much debt by comparing your total debt to your other finances - like your income.
Calculate Your Debt-to-Income Ratio 
Your debt-to-income (DTI) ratio is an important number that tells you just how much of your income is being spent on debt. The higher the percentage, the more you're spending on debt. A DTI ratio lower than 36% is ideal.
Good Debt vs. Bad Debt 
There are some debts that can be considered good. If there is such a thing as good debt it includes loans that were used to buy things that appreciate in value or help you make money. This includes mortgages and student loans.
Join the Debt Diet Support Group 
Talk with other readers who are going through the debt diet. Share your successes and setbacks. Get motivation to pay off your debt.

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