What is Debt ceiling? How does that effect your personal Debt management?
Can you payoff Credit Card Debt or other debts or even do Debt consolidation regardless of any changes that might occur?
If you have been watching the news! the words “Debt ceiling” has been coming up with great frequency and suggests larger Debt problems in the USA. Does that spell into greater problems for the US economy? How about the Canadian economy?
The answer to that is as usual, it depends. Let us look at it from a personal finances point of view.
Is there a Debt ceiling for personal Debt? more importantly, should you have a Debt ceiling for you personal finances? the answer to those questions is a big YES.
How do you find out what it is? Calculate your Debt to income ratio.
This is not a simple answer. Is it? Well, let us try to simplify this; ask yourself, if you go to the Bank and ask for additional Credit facility, would the bank extend your credit or deny it? and why would they accept or deny the request for additional Credit?
The Bank will do an assessment of your total current Debts , get an idea of your Expenses and compare it to your Income and Assets.
Here are quick ways for you to get a quick answer
- Are you making only minimum payments on your credit card?
- Are you able to payoff Debts that you are currently carrying within a planned period of time?
- Are you getting calls from collection agencies?
- Has any change occurred in your job situation?
- Has any change occurred in your personal life?
If you answered Yes to any of the above, raise (1) one flag.
If you answered Yes to more than one of the above then raise (2) two flags.
You get the idea.
So how does the economy effect your personal situation? well, if we keep increasing the size of the Debt our long term ability to get rid of this Debt becomes less viable. It is like your personal health, if you keep buying larger size dresses or pants to fit your new weight increase, then your ability to shed off this weight gets harder. Personal debt is no different.
Initially, Debt amounts may seem manageable, the Debt problem gets worse as interest keeps adding up.
For you to keep on top of your financial situation, use redly available tools that helps you track your Debts like a self help work sheet , use the link for one we put together.
Or use on-line tools that provide a good estimate if there is a change in the amount of Debt, increase in interest rates, even what would be a good amount to pay monthly on your Debts, try our free Debt Calculator.
Debt Ceiling is a measure for your own ability to handle your Debts and particularly the unsecured Debt. Set your own limit and ceiling as it pertains to your own situation. when in doubt talk to the experts in Debt Management and take advantage on any free counseling and assessments.