How Much Debt Is Too Much Debt?

In a recent Linkedin post by James Pollard, he talked about the frightful conditions of our current economy, and how many Americans are not prepared for an emergency. His post reminded me of a question a client asked me recently...

"How much debt is too much debt?" Often, when, times are tough, we start to take stock in our decisions and behavior regarding #money. Here's my basic "personal finance 101" answer to the question...

How Much Debt Is Too Much Debt

Here are some basic rules of thumb regarding your household debt.

1) Your debt payments should not exceed 36% of your income.

2). Your housing payment (mortgage or rent) should not exceed 28% of your income.

This is known as the 28/36 rule. For a household to be in the "safety zone" your total debt obligations should not exceed 36% of your income. This includes car payments, credit cards, #schoolloans, and your mortgage payment. If you're renting, substitute your mortgage payment for your rent. If you follow this rule, you should be in the "safety zone" where you can maintain your lifestyle, save for the future, and maintain an emergency fund.

Expert's Point Of View 

Now, allow me to put on my #wealthcoach hat for a moment...

When a client asks this question, it often comes after we have the cash flow conversation. Having all the numbers laid out in black and white is often a wake-up call. And, the client asks because deep down, they're concerned their debt is too much debt.

 5 Clues

Here are 5 clues that let you know when your debt limit is too high...

1). Worrying about meeting your obligations keeps you up at night.

2). You struggle to choose which bills to pay.

3). Your debt obligations make it impossible to save any money.

4) You're considering (or you have) refinancing your home to pay your debts.

5) You're considering (or you have) withdrawn money from your retirement account to pay for debt.

Viable Options

If you see yourself in any of the above scenarios and have questions, don't wait to get answers. Help is available. If you're working with a #financialadvisor,

schedule a time to review your situation. If it's been some time since you've

either updated or reviewed your #financialplan, now's the time!

What's Your Plan, Stan?

Don't have a plan? You might want to change that! As Ben Franklin said

"If you fail to plan, you plan to fail".

Finding a highly qualified #financialadvisor is easy. Check the websites for financial planner listings, such as the #CFP (, your local Financial Planner's Association's site, or #NAPFA ( to name a few. Do you have a family member or friend who's #moneysavvy? Consider asking them for an introduction to their advisor.

Where To Get Answers

Still have questions? Feel free to reach out. You may use my calendar tool to schedule a free "learn more" call with me. Here's the link.

About the author 

Therese Nicklas

Therese Nicklas is a CERTIFIED FINANCIAL PLANNER™, Certified Money Coach(CMC)®, and Certified Success Principles™ Coach. She specializes in helping executive women who are at a crossroads and feel uncertain about their next steps. By empowering them with smart money strategies, they learn how to build their new big, bold life with certainty, clarity, and confidence. She is passionate about inspiring women to design a fulfilled, intentional life. “True wealth – true financial freedom – is being free to focus on the things that matter most to you – what money can’t buy.” Her motto – “live your life by design and not by default”.

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