10/9: Keeping Your Debt In Check

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Eau Claire (BAIRD)- Many people deal with juggling their debt, but Andy Schlafer tells shares his tips to keep your debt in check. Debt can either be a powerful leveraging tool or a path to financial disaster.

Andy Schlafer says debt is not always a bad thing. He says debt can make goals possible, like home buying.
Now debt can undermine your financial position if mismanaged. Good debt buys appreciating assets and bad debt buys depreciating assets such as cars, toys, and credit card purchases. Student loans (within reason) are usually considered good debt.

Some debt is reasonable for families. To determine how much is reasonable Schlafer suggests using this equation. Debt to Income Ratio = Total monthly debt payments / Monthly gross income
Total monthly debt payments should not exceed 36%, housing related debt < 28%.  If you lower your debt ratio, it will put you in a better position for emergencies and opportunities.

Some people may already have too much debt. Schlafer suggests paying off the loan with highest interest rate first. He also says your credit score is very important. Banks use this to determine your interest rate. He says you should only use credit cards for convenience. Always pay your balance in full monthly. No exceptions.

Andy Schlafer also says, “consider taking on new debt very carefully. The lower your monthly payments, the more you have for living & saving for future goals.”

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