University of Illinois Extension

Decide How Much Credit Is Too Much

Now, let's see what your debt rate is. What percentage of your take-home pay goes to pay your debts? The average American has a debt rate of around 12 percent.

Find Your Debt Rate

Divide your total monthly debt payment by your monthly take-home pay.

  1. What is your total monthly debt payment? $_____
  2. What is your monthly take-home pay? $_____
  3. What is your debt rate? _____%

For example: If your monthly take-home pay is $1100 and total monthly debt payment is $132, then your debt rate is 12%.

$132/$1100 =0.12
0.12 X 100 = 12%

Another Way To Check Your Debt Level

People in different situations can handle more debt than others. If you don't trust the numbers, read the following statements. If you answer yes to more than two or three of them, you should work on trimming your debt.

  1. You pay only the minimum amount due on your credit cards each month.
  2. You buy so much on credit that the amount you owe from one month to the next month never goes down.
  3. You take out new loans or get new credit cards to pay off old ones.
  4. You have to skip some payments.
  5. You overdraw your checking account.
  6. You charge day-to-day expenses like groceries, because you don't have the cash.
  7. You are late making your payments most months.
  8. You rely on extra income from overtime to make ends meet.
  9. You use savings to pay current bills.
  10. You borrow money to pay bills that you know are coming, like taxes and insurance.
  11. You don't have an emergency fund.
  12. You put off medical and dentist visits, because you can't afford them.

If you need to trim your credit, start now. Get the Credit Card Smarts fact sheet "Get Rid of Credit Card Debt."

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