How much debt is reasonable

yellow218

Hi

I've posted in other areas on the site (and others) amount my 0%credit card.

However what proportion of say house hold income/gross salary is considered reasonable as debt?

I know that hubby and I have 'excellent'credit scores with both above 980, and always getting large ish limits on credit offers.

But when does debt become too much. What are the warning signs.

Personally I feel I have the debt under control, able to meet payments and that it is all 'good debt' (ie investing on our home). But i worry what friends and family would think if they knew how much debt we had. Would they think it is reasonable spend or would they worry about us.

Thanks for your help

HappyMJ

I would worry about it if the interest alone exceeded half of my take home pay.

Having 10 times your gross salary could be affordable if the interest rate was 1% and only interest was required to be repaid with the capital to be repaid on the sale of the asset or by using a pension to clear it on retirement...then again rolling your monthly pay over each month (1/12th of your annual salary) through a payday loan every month is also unaffordable.

PeacefulWaters

There's no set figure.

For me, no debt (beside mortgage) should be the aspiration. Some savings should be non-negotiable in sensible contingency planning too.

Once you realise your debt is higher than it was a year ago you may want to ask "when are we going to reduce the balances owing?" - there's a danger it just keeps increasing.

Personally I feel I have the debt under control, able to meet payments and that it is all 'good debt' (ie investing on our home).

I'm not in a position to judge, but these sound remarkably similar to the words you'd hear from an alcoholic or drug addict.

"Investing" in your house rarely adds more than the cost to the value. The spend is usually more than the gain.

But i worry what friends and family would think if they knew how much debt we had. Would they think it is reasonable spend or would they worry about us.

None of their business.

CLAPTON

yellow218 wrote: »

Hi

I've posted in other areas on the site (and others) amount my 0%credit card.

However what proportion of say house hold income/gross salary is considered reasonable as debt?

I know that hubby and I have 'excellent'credit scores with both above 980, and always getting large ish limits on credit offers.

But when does debt become too much. What are the warning signs.

Personally I feel I have the debt under control, able to meet payments and that it is all 'good debt' (ie investing on our home). But i worry what friends and family would think if they knew how much debt we had. Would they think it is reasonable spend or would they worry about us.

Thanks for your help

it's reasonable to have savings




however if debt is being 'invested then it depends upon what is meant by 'investment'


the debt servicing needs to allow for the normal (inevitable) 'unexpected' events that life throws up
for some this may be boiler replacement, others a car replacement, others the birth of a child...........

Thrugelmir

How do you propose repaying the debt? All hunky dory until your pay cheque doesn't arrive one month. Then doesn't feel so comfortable, and your world won't seem so secure.

Pixie5740

It depends if you have something to show for the debt such as a house or a university education, or if you're not really sure how you accumulated the debt.

If you can't survive from one pay day to the next without dipping into overdrafts and putting money on to credit cards then it's time to worry. You start off being offered generous credit limits and then when you're robbing
Peter to pay Paul the banks won't want yo be your friend anymore.

Don't worry about what other people think, it's none of their business.

Stop wasting your money paying for arbitrary scores from credit reference agencies. They don't kend money so any score they give you is like a broken pencil.....pointless.

James_B.

If it's for day-to-day living, then none at all. It's not healthy or sensible to be using debt for food, rent, clothes, entertainment etc. unless you genuinely are about to start earning more, or are about to come into a windfall.

Yes, people do end up doing it, and it's not always a large problem, but it's rarely a good idea.

yellow218

Hi thanks for your replies.

Just to clarify all living costs (mortgage,bills,food,clothing,leisure etc) are covered by income. The only debt (except mortgage and student loan) are on zero %credit cards and are for home improvements (materials for diy garage build, new kitchen, addition of downstairs loo, new master bathroom suite). Having googled it seems that these home improvements are things that up the house price so therefore an investment. We do all the work ourselves- compliant and signed off by buikding rega so only cost of materials is the debt.

We pay off the minimum about by direct debit each month. And put aside money each month into a savings account (every little interest earned helps!)

PeacefulWaters

yellow218 wrote: »

Hi thanks for your replies.

Just to clarify all living costs (mortgage,bills,food,clothing,leisure etc) are covered by income. The only debt (except mortgage and student loan) are on zero %credit cards and are for home improvements (materials for diy garage build, new kitchen, addition of downstairs loo, new master bathroom suite). Having googled it seems that these home improvements are things that up the house price so therefore an investment. We do all the work ourselves- compliant and signed off by buikding rega so only cost of materials is the debt.

We pay off the minimum about by direct debit each month. And put aside money each month into a savings account (every little interest earned helps!)

I get that you can afford it. At the moment.

0% cards are all well and good. Until you can't get another one and still carry the debt. Or end up attracting 3% balance transfer fees.

If you've got 100% of the balance in savings then it's not what I'd call real debt.

MrsSmith2013

I would say no debt at all is reasonable! I've learned the hard way, and once its paid off I will never ever get into debt again. It will be a case of saving up for things and buying them cash, instead of sticking it on a card and paying for it later.

Everyones situation is different, but I cannot WAIT until the payday when I only have to pay the mortgage and essentials and the rest isn't going on debt repayments!

heartbreak_star

The fact you are only paying the minimum amount rings alarm bells for me. Why not overpay and get it cleared? Do you have enough spare to pay extra once the interest kicks in?

HBS x