It’s fair to say that most people have debt in one form or another. For instance, the debt might be a mortgage, car loan, credit card or line of credit. This is fine if the debt is manageable, however when debt gets out of hand problems start to arise. But how much is too much debt? The answer to this question may not be as difficult to answer as one might think.


Responsible debt management starts with knowing and understanding your exact financial position. It's vital to have a clear understanding of your income and expenses. Naturally, the aim is to maximise the income and keep expenses to a minimum. In this regard, a budget will help track and keep spending in check as well as highlighting arrears where savings could potentially be made.


But how much is too much debt? Is there an exact way to measure whether or not you are holding too much debt? The answer is yes and it’s called the debt-to-income ratio.


To calculate your debt-to-income ratio, all you need to do is add up what you spend on a monthly basis towards your bad debt, and then divide it by your monthly income. To turn that figure into a percentage, multiply that figure by 100. The lower the percentage, the better. In previous articles we talked about the difference between good (equity) debt and bad (consumer) debt. A bad debt ratio above 10% is too high.


Once you have determined your debt position and decided to improve it, the next step is to review and address and budget issues that may exist. Debt Fix has many free tools and calculators including a useful budget planner to help inn this process.


After this, if the debts are still too high and there is no way income can be improved or savings made in the budget, it’s important to look at other options. For people with unmanageable debt, believe it or not there are many solutions available. The most important thing is that if you need to speak with someone about improving your situation then they should be an expert like an accountant, financial advisor or a company like Debt Fix.


As stated before and in other articles, there are many options available to people struggling with debt. Each option has it's pro's and con's and its hard to know what is best approach. The answer to this question is easier than you might think. The right solution for you is the one where you are satisfied with the benefits and comfortable with the consequences.


In this way, before you make any decision, you need to be informed and have a clear understanding of the options. Taking control of the situation may sound like hard work, but it will lead to a better financial position and ultimately relieve stress.