Debt can be a useful tool for achieving important goals, such as buying a home or investing in your education. However, irresponsible borrowing can lead to financial problems and stress. In this article, we’ll show you how to calculate how much debt you can safely carry without harming your financial health. Be prepared to make informed decisions and build a solid financial future.
06 Tips for knowing your debt limit
01 Know your ability to pay
Before acquiring a new debt, it is essential to know your ability to pay. This means analyzing your monthly income and regular expenses. Calculate how much money you have left over after paying your basic expenses, such as housing, food and utilities. This surplus gives you an idea of how much you can afford to pay off new debt without compromising your financial stability.
02 Establish a realistic budget
Create a realistic budget that reflects your monthly income and expenses. Define specific items for savings, entertainment and other necessities. A well-structured budget will help you keep control of your finances and avoid unnecessary expenses. If you have existing debts, be sure to include monthly payments in your budget.
03 Calculate your debt ratio
As we mentioned in our previous blog, the debt ratio is a useful tool to evaluate your financial situation. Calculate this indicator by dividing your total debts by your monthly income. A ratio of less than 0.4 is recommended, as it indicates that your debts are manageable in relation to your income.
04 Consider your financial goals
Before going into debt, think about your short- and long-term financial objectives. Ask yourself if the debt you are about to acquire is aligned with your goals. If the answer is yes and it will allow you to achieve your financial dreams, then the debt is more likely to be worth taking on.
05 Prepare for the unexpected
Life is full of surprises, some pleasant and some not so pleasant. Before you go into debt, make sure you have an emergency fund with enough money to cover at least three months of basic expenses. This way, you will be protected against unexpected situations and will be able to continue meeting your financial obligations.
06 Consult experts
If you feel unsure or have doubts about how much debt you can safely carry, don’t hesitate to seek financial advice. Experts can help you assess your situation and provide personalized recommendations.
Ready to apply for your loan?
Borrowing responsibly is key to maintaining sound financial health. Knowing your ability to pay, having a clear budget and setting financial goals will allow you to calculate how much debt you can afford without jeopardizing your financial stability.
At Zero Gravity, we want you to make informed financial decisions. Remember that we are here to help you find the best loan options and provide you with financial advice if you need it. Let’s build a prosperous and secure future together!
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