Liz Pulliam Weston's latest column at MSN Money has me comparing myself to others in my age group and income bracket.
As Liz points out, sometimes we kid ourselves that if we're making all our minimum payments each month, we must be doing fine. It helps to run some calculations to see if that's really true. She provides four ways to measure.
Grace's results were not surprising but they were disappointing.
For example, my Leverage Ratio of 14% was pretty good for my income group. For my age? Not so much. But it makes sense that I'd be about ten years behind my age group given that I started saving so much later.
Then I checked out my Debt to Income ratio--talk about depressing. Mine is 36% which is right on the edge of disaster. According to Weston, disaster comes at 40%--and I'm way too close to that point.
But it's when I check out my Bad Debt to Income Ratio that things get really bad!
Note that this does NOT mean that all my debt is bad--but my so-called toxic debt (credit cards, loans, etc.) equal 32% of my annual income. NOT a good plan! And not good compared to others in my age and income brackets.
OK, Liz now has me worried! The hope is that these calculations will spur me on to reduce the debt.