1. Money

Debt Diet eCourse Week 3 - Assess Your Debt

How Much Debt Do You Have?

By

Welcome to the Debt Diet eCourse. This five-week course will take you using debt to satisfy your wants and needs to getting started with a get-out-of-debt plan. You won't pay off your debt five weeks, but you'll have a foundation in place to get rid of your debt for good.

Lesson Index: Week 1 | Week 2 | Week 3 | Week 4 | Week 5

Assess Your Debt

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.

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.

©2014 About.com. All rights reserved.