Deciding How Much You Can Pay

Once you have listed everyone you owe, determine how much you can pay each creditor and how long it will take to pay back each debt.

Generally, it is good to limit the amount of credit you owe (excluding your home mortgage) to no more than 10 percent of your monthly take-home pay.

If your family has $2,200 a month after taxes and tithe, try to keep your credit payments under $220 per month ($2,200 x 0.10 = $220). But if you already have numerous debts, figure out a way to use 25 percent of your monthly take-home pay for paying back your monthly debts. You usually need 75 percent of your income to maintain your necessary daily living expenses.

A family earning $2,200 a month probably needs to keep $1,650 ($2,200 X 0.75 = $1,650) for basic living expenses. That leaves $ ($2,200 X 0.25 = $550) for debt repayment.

If the minimum monthly payments add up to $696, for example, you must find ways to increase the money available for debt repayment.

Your thoughts on this subject? Your comments appreciated!

Content © Rich Brott, 2011

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Reader Comments

The basis of this thought process is good. However, people need to learn/ be taught thst they should take care of the basics first. After taxes/ tithe are taken care of housing, food, transportation, and clothing should come before paying someone else.
The key here is that these things not be outrageous amounts. Too many people are paying Mastercard and getting behind on their mortgage. Sacrifices will need to be made (packing lunches, shopping at Goodwill, etc.) to free up some money. This also includes saving money for yourself intentionally. There is nothing worse than busting your tail to pay off a credit card only to have to put more on it when the brakes go out because you have no savings.
Just my $0.02.