Debt can feel like a massive weight around your neck. And if your debt is increasing by the day, it can feel totally hopeless. But you\u2019re never out of options. There\u2019s always something you can do to attack your situation and set yourself up for a more positive future.<\/p>\n\n\n\n
How Much Debt is Too Much?<\/strong><\/p>\n\n\n\n Let\u2019s start by getting clear on what is meant by having too much debt.<\/em> (After all, some debt can be good debt. While other debt can be bad debt.) <\/p>\n\n\n\n Generally speaking, any debt-to-income ratio higher than 43 percent is considered too high. If you\u2019re at or above this threshold, you should consider taking action as soon as possible. But even if you land in the 36 to 42 percent range, this is still an indicator that you\u2019re in a bit of a danger zone. Ideally, your debt-to-income ratio is below 36 percent, which is considered normal, manageable, and healthy. However, with all things, there\u2019s some variability here.<\/p>\n\n\n\n It\u2019s not just important to look at the total dollar amount of your debt you have and the percentage of your income that it represents. You also have to consider the type of debt. Personal finance<\/a> experts often discuss debt in two buckets: good debt<\/em> and bad debt<\/em>.<\/p>\n\n\n\n \u201c[Good debt exists] when the interest rate is low and fixed, and the loan is used to buy something that grows in value, like a house, business<\/a> or college education,\u201d NerdWallet explains<\/a>. \u201cIt\u2019s also good if the interest is tax-deductible, like most mortgage and student loan interest.\u201d<\/p>\n\n\n\n On the other hand, bad debt exists when the interest rate is high, variable, and\/or the money is used to buy things that lose value. Examples include cars, high-interest personal loans, credit card debt for things like vacations, medical debt, etc.<\/p>\n\n\n\n 3 Ways to Get Out of Debt<\/strong><\/p>\n\n\n\n If you\u2019re facing large amounts of debt, you\u2019re probably looking for a way to get your finances back on track. Here are a few suggestions:<\/p>\n\n\n\n It\u2019s impossible to be healthy financially if you don\u2019t have a clear understanding of how much money is coming in and going out each month. This is why it\u2019s crucial to develop a spending plan, otherwise known as a budget. <\/p>\n\n\n\n A budget forces you to account for how much money you\u2019re earning and where it\u2019s going. The mission is to account for every dollar, which allows you to see how you\u2019re doing in different areas of your finances.<\/p>\n\n\n\n There are plenty of helpful resources<\/a> out there that can show you how to develop a spending plan. Pick a strategy that you like and go with it. It\u2019s less important how<\/em> you do it and more important that you just commit to doing it.<\/p>\n\n\n\n You can\u2019t continue to approach debt without a clear and defined strategy for how you\u2019re going to repay it. You need to develop a specific plan of action.<\/p>\n\n\n\n There are plenty of unique approaches to debt repayment \u2013 and it would be a good idea for you to review each of them. Two of the most popular include:<\/p>\n\n\n\n There\u2019s no right<\/em> or wrong<\/em> way to approach your debt. The important thing is that you pick a strategy, commit to it, and don\u2019t stray.<\/p>\n\n\n\n\n
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