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Debt Ratio Formula, What Should Ours Be? – Victor

“Dear Steve,

I started out in college with the only debt being my college loan which was manageable. Then it was suggested that I get a credit card while in college so that I could start to establish some credit. Well I got a credit card, then I got another credit card, and another, now I have high credit card debt. Using the credit card was like an addiction.

I have high credit card debt on top of my monthly utility bills, how do I lower my credit card debt while still paying my monthly utility bills. I am basically living pay check to pay check. Here are my bills including my wife’s.

Credit Card 1: $16,903.06
Credit Card 2: $5,933.40
Credit Card 3: $12,929.73
Credit Card 4: $10,938.64
Credit Card 5: $2,446.17
Credit Card 6: $1,133.38

Loan 1: $19,504
Loan 2: $4,160
Loan 3: $5,629
Loan 4: $3,937

Utility 1: $198.20
Utility 2: $224.00
Utility 3: $329.00
Utility 4: 126.00

Dear Victor,

The current issue is that your debt to income ratio is all out of whack. Basically you owe more in monthly obligations that your income can support.

There are a number of free get out of debt calculators you can use to start to dig out of this hole. But I suspect that you are so close to the edge now that there is little money to devote towards extra debt repayment payments.

Before I give you a comprehensive answer I’d like for you to post an update in the comments below with some additional information.

  1. Over the minimum payments, how much extra money do you have on a regular monthly basis to use for debt repayment?
  2. Do you have a savings account or emergency fund you can fall back on in case you have a financial emergency?
  3. Are you and your wife pooling your income and debt or is repayment dependent on your income alone?

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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