Introduction:
Knowing the amount of debt you have is extremely important. People often partition their debts so that the number does not seem as large as it really is. For example, they might separate their home loan from their other debts or categorize debts into types and then look at the debts this way.
Why Should I Know How Much Debt I Have?
It is important not to separate the total amount of debt you owe from each other because that can make it very easy to continue accruing debt. Your true financial picture should include a large sum of all debts, then compare it to the amount you earn currently in a year. If you owe more than you earn in a year, you should start working quickly to stop the debt and change that number.
How Can I Find Out How Much Debt I Have?
Start by gathering all the debts you have, including your home loan, then add the numbers together until you get the total. This should include your credit cards, store cards, installment loans, and your home loan. Then add the figures without including the home loan. After that, look at each statement and calculate how much you are paying in interest each month. Then you can sum up your payments each month to determine your monthly debt load. You can also pull your credit report and double-check to ensure you haven’t forgotten any debts.
What Should I Do with This Information?
There are two things you should do with these numbers. First, look at your budget and determine the percentage of net income being used to cover minimum debt payments. This percentage should not exceed 30% of your income as it is risky. Then, subtract the amount you pay in monthly interest from the amount you pay towards your debts each month. The resulting number is the amount by which you are actually reducing your debt each month.
Conclusion:
These calculations and questions can help you see your current financial situation. Your debts may quickly take control of your life and limit your options because you always have a payment. Additionally, consider what you could do with all the money you send to pay off your debts each month. All these factors can help you make the decision to get out of debt and stay out of debt. It is important to remain focused on getting out of debt while working on your debt repayment plan.
Source: https://www.thebalancemoney.com/does-it-matter-how-much-debt-i-have-2385985
Leave a Reply