A Safe Debt Load is Vital

Never rely on overtime to pay your bills…

Ten percent of your take-home pay is considered a comfortable debt load. Fifteen percent is thought to be manageable, but anything approaching twenty percent is a sign you're getting deep in debt.

Your debt load is the amount of your take-home pay that goes to pay off creditors each month after you pay your rent or mortgage payment.

Another rule of thumb for deciding if you're overextended is to figure your income and, excepting rent or mortgage, determine if you can pay off your other borrowing comfortably in one year. If so, you are probably carrying a safe debt load.

It's easy to know if your debt load is too heavy.

Here are some signs you should look for: First, you find it harder each month to make ends meet. Another sign is that you rely on overtime pay or moonlighting to pay your bills. Another sign of too much credit is when you pay only the minimum on your charge accounts and sometimes juggle payments, stalling one creditor to pay another. One other sign is when you struggle to save even small amounts and don't have enough money saved to get you through emergencies such as a cut in pay or repairs on appliances or cars.

Credit can be a real asset or a detriment.

How you use credit determines which it will be. The following credit guidelines can help you manage your money.

• Always decide how you will pay for an item before you buy it.
• Don't use credit if it means you will still be paying for the item long after it is used up or gone. Remember: credit costs money.
• Ask yourself if you would buy the item if you had to pay cash for it instead of putting it on credit.
• Always use comparison shopping and get the best buy for your money.
• Don't be a soft touch for sales people. Credit is easily available, and businesses urge people to use credit because people who use credit may spend more.

Buy only if you have a real need for the item. Try to use credit only for items that will increase in value after you pay for them. Credit always costs more than paying cash, even in stores that offer no-interest accounts, because prices may be slightly higher. Cost can vary, so shop carefully and use credit only when necessary.

Even if you're getting along fine now, don't take on additional debts without calculating your ability to repay them. If your mortgage or rent payments takes more than twenty-five percent of your pay, a debt load of twenty percent is probably too much.

For more information and suggestions about home budgets, contact your local county Extension office.