Tuesday, January 17, 2012
I receive a email about Thrifty Hints and this was a part of the recent one :
A healthy debt ratio, or at least an average debt ratio, is about 35 percent and below. Ideally your ratio should be about 15 percent, but if you're not above 35 percent then you're in good fiscal shape. Regardless of whether or not you have a lot of money, what you do have is under control and ready to go where it needs to go.
A debt ratio between 36 and 42 percent is where you should start being concerned and figuring out a financial plan so you can start paying some of that off. If your ratio is between 43 and 49 percent start expecting significant financial difficulties in the near future.
If you can work your debt ratio down to 35 percent or lower then you'll qualify for the loans you want and the interest rates you want as long as your credit score is also in good shape.
We have always spent less than we make. We live in a paid off house (not a great one by any means) and the only debt we have is our credit card bill which we pay off every month. So our debt ratio is very small.
I like the last paragraph of the above quote : work your debt ratio down to 35 percent or lower then you'll qualify for the loans you want.
So they are saying if you get your debt down you can borrow more to get your debt ratio back up!
Maybe this is why everyone is so far in debt, don't save up for what you want, get it now and borrow, borrow, borrow!