Question: My husband and I are approximately $50,000 in debt with assets valued at $225,000. What debt did you have when you realized you really needed to get back on track and on a budget?
This to me seems like a question only you can answer but a budget should be imperative for everyone not just people in debt. If you are waiting for someone to give you a number it will never happen. We all have different feelings about debt especially if we have goals and depending on what stage we are in life. In my opinion any debt is too much debt especially if it is consumer debt.
In my time, although I am still young I have never incurred any debt that was anything more than my mortgage. I’ve always saved up cash to pay for what I wanted or needed in and it has served me well. When I went to University both in the UK and Canada I paid for my education in cash by working full-time and living with-in my means. I have however seen the effects of what high consumer debt has done to family and friends on a personal level and it can be devastating.
Debt simply means money that is owed or due to someone. If you don’t like to owe anyone money then your debt is too much. If you struggle to sleep at night or concentrate during the day you may need to take a hard look at where your money is going. I believe that school loans which really are investments in yourself are not as bad as consumer debt. Without school debt most would not have been able to get the career they have to build a meaningful life for themselves. So education to me is very important but paying off that debt as soon as possible is also key.
If people are simply piling debt onto credit cards of lines of credit to buy “stuff” then really the answer is quite clear. If you don’t have the money, you don’t spend it. Too many people are making excuse after excuse and pointing the finger at everyone but themselves.
Some of the Questions I might ask myself if I had 50K in debt are:
- Who do we owe, how much and at what interest rate?
- Do we want to own a home some day if we don’t already?
- Do we have emergency savings?
- Is our Mortgage paid off and do we want to pay off our mortgage early?
- Is it worth it to roll the debt into the mortgage?
- Are our assets liquid or are they in the mortgage?
- Are we maximizing our investments ie RRSP, TFSA?
- Are we prepared in the event of an injury,job loss or disability?
- Are we contributing to our children’s RESP?
- Can I use some of my assets to pay off my debts?
- What are the implications of pulling money fro investments? Is it worth it?
- How old are we?
- Do we have a family or plan to start a family?
- What are our long-term and short-term goals?
- Where do we plan to retire and when?
- How much money do we want when we retire?
- How long will it take to pay off our current debts with both of our incomes?
- Will we be potentially getting significant increases in our income in the future?
I’m sure I could grow this list quite large as I tend to think as far ahead as possible but that’s just me. Organizing important information like this and understanding what you owe and what it will cost you over the term of the loan is imperative. When people actually see that an $800 credit card bill at 19% will take them a whopping 3 years or more years to pay off when paying minimum payment SHOULD be an eye opener.
We started to really budget the past couple of years now since we bought our home and it has made a huge difference to our finances whilst building net worth. It was important for us to design a budget that met our needs which since evolved over the past 2 years to what it is today. It’s enabled us to set short-term and long-term goals and feel happy about achieving them. Although if we were not both committed to this budget it would never work.
Before budgeting we thought we were saving by using the all time favourite accounting in our head. It’s not easy but saying, no we are on a budget will be the best words to ever come out of your mouth in a debt payback situation. If you are worried about your debt load talk to your financial advisor about what he/she feels is the best steps for you as he will have the financial information at his finger tips. Thanks for your reader question.
How Much Debt is Too much? Well, only you know the answer… and only you can make the desired changes you need to get out of the debt.
How would you answer this reader question? Share your thoughts in the comment section.
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A BUDGET IS NEEDED WITH OR WITHOUT DEBT!!!
Sorry for the capitals, but it pisses me off when people don’t realize this. Even if I was worth $1 mill, I’d still budget – it’s only natural for me to see where my money is going!
Awesome! I know that we want everyone to get it but the harsh reality is that it’s somewhat difficult for some to understand. Sounds silly but hopefully we as pf bloggers can keep spreading the word. If people choose to listen that’s their choice. It’s their life, sad I know but what can you do. Cheers Mate, thanks for dropping in. Mr.CBB
It’s true, whether you’re worth $1 million or – $50,000, you need a budget. I am continually trying to convince everyone I come in contact with of this. Most people spend more time planning their excursion to the beach for a day than they do planning their entire financial future. I hope to change that
Ha.. that’s so true mate. People will put more effort into planning something that is exciting than their budget. I think, but isn’t the future just as exciting.. no debt,money, travelling etc… odd.. but I hear ya!
Once I am out of debt I will definitely continue to budget, so that I always live by my means and can save up for things I want to do easier.
I think that everyone should have a budget- regardless of their financial situation. A budget is only a plan for how your money should be spent. Why work so hard to earn money then not make a thoughtful plan for how it should be spent?
I agree with all of you and I think the reader when he/she reads your comments he/she will see that it’s not just coming from me but others that are PF bloggers that live for this kind of stuff. Now if only we could get others to understand what we see and do! Cheers mate. Mr.CBB
I agree with Modest Money. I think any debt is worth working your butt off to get rid of, but obviously there’s some points in your life where you just have to chip away at it (ie. student loans, mortgage.) It’s still good to pay those off early, but they’re investments you willingly go into and aren’t, in my opinion, as horrible as consumer debt.
With a budget and some support from Mr CBB you can do it!!! Budgeting with Mr CBB’s support has made a HUGE difference for me!
Just for the record Jen is not a paid commenter hahahahah… cheers Jen, that means alot to hear! Mr.CBB
I think if they are asking that question, then they likely should start budgeting. Obviously that debt is of some concern to them. The great thing about budgeting is that it will get you out of debt sooner and also help you reach any other financial goal quicker. So the sooner you embrace budgeting, the sooner you’ll take control of your finances.