In 2015 I was in severe debt. $84,680.26 to be exact. Some of you may wonder how I managed to accrue such a high number, while others understand completely, or even think it's low in comparison to what you or others are experiencing.
In either case, any number that is nearly twice that of the United States median salary is not good. And I'm not speaking to home loans, but anything that was accrued through credit cards, car loans, personal loans, mortgage loans, student loans, gambling, etc. All debt is too much. My belief is that any debt, regardless of its amount, that places stress or tension on you, or your family, is too much.
And the debt I'm speaking of is not getting a credit card or loan for appliances, charging it, then paying it ALL off right away, because you have the funds in your bank account. Debt is when it accrues, sits there, builds interest, and is more than what you have in your bank account to pay off, and don't pay off. Debt is anything you can't (or won't) pay off right now. That's where I was. I had $100 in my bank account. The debt-to-income ratio was not looking good for me.
According to most lenders, the general consensus is that any debt-to-income (DTI) ratio of 43% or higher will not qualify for a Qualified Mortgage Loan. So 43% is the understood maximum. There's this thing called the 36% Rule. It basically means that a good DTI is anything at or below 36%.The lower this number the more freedom you have with your life. The higher it is the worse off you'll be if something happens. For example, you lose your job, medical bills, etc. You want this number to be low.
You figure this out by taking all of your monthly debt and expenses (mortgage, credit card, phone bill, internet, cable, student loan, groceries, gas, etc.) and dividing it by your total gross monthly income (what you earn before taxes).
DTI = total monthly debt (all money leaving your account) / total monthly gross income
Let's assume the following:
Mortgage Monthly Payment - $1,500
Internet Bill - $100
Student Loan Payment - $500
Car Payment - $500
Other Monthly Bills/Expenses - $1,000
Gross Monthly Income - $6,000
Total Monthly Debt (expenses) - $3,600
Total Monthly Gross Income - $6,000
Your DTI would be 60%. Not good, and well above the maximum of 43%. If you're already thinking ahead, and love math like I do, then you might have figured out what my DTI was back in March 2015. Note that in March 2015 I had a job. Before then I did not, which means this number would be WAY higher for me.
My monthly debt was roughly $6300 and my gross income about $4583. Following with the DTI ratio equation, that puts my DTI at 137.46%; over three times the maximum DTI! I guess you could say I was in a bad place. What's your debt-to-income ratio? Is it below that golden number of 36% or is it out of control like mine was? If your DTI is above 36%, then this book will help you.
I wish I could say this happened over night, that I had one big negative outcome that sent me into a tailspin that I couldn't recover from, but that's just not the case. My descent was a gradual slide into the pit.
While I suffered from chronic depression, anxiety, and pain, I didn't have a medical emergency or surgery that placed me under this debt. There were no deaths or lost jobs that buried me in a hole. No, this $84,000+ was my doing, one choice at a time, over eight years.
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My Blessed Life: 9 Steps to Financial Freedom And Getting Out Of Debt Fast
Non-FictionDebt is the #1 threat you have to your financial safety and security. Debt keeps you trapped in a vicious cycle of paying high interest to the banks, the credit card companies, and all types of creditors. While they become rich, you become poorer a...
