Most people have some kind of debt. It might be in the form of a mortgage, an auto loan, a student loan, or even a credit card balance. Having debt isn’t a bad thing as long as you are taking steps to pay it off. It’s having too much debt that can cause an unhealthy financial life. Taking the time to determine whether or not you have too much debt can provide confirmation that you are doing things right or the realization that some financial changes are needed.
One of the best ways to calculate your debt load is by figuring out your debt-to-income ratio. This is the amount of debt you have relative to your income. You can calculate your debt-to-income ratio including good and bad debt, or you can leave out good debt. If you want to gauge your debt overload, it’s typically better to calculate the ratio considering only bad debt.
On the other hand, if you want a total picture of your debt, include both good and bad debt (see Good Debt vs. Bad Debt).
Calculating Debt Overload
For starters, let’s say you want to gauge just your debt overload. The calculation for your debt-to-income ratio is fairly straightforward. Simply add up the amount you spend each month on bad debt and divide it by your total monthly income. Multiply that number by 100 to come up with a percentage. The result is your debt-to-income ratio.
For example, let’s assume you make $3,000 a month. Let’s also assume you spend $300 on credit card payments and $450 on an auto loan. Your ratio calculation would be $750 divided by $3,000 which is equal to 0.25. Multiply that by 100 for a debt-income-ratio of 25%. In this example, you spend a quarter of your income on bad debt.
When it comes to debt, whether good or bad, the lower the debt you have, the better. A bad debt ratio beyond 10% is too high and often is a sign that you are overloaded with debt. Under this scenario, you would have too much bad debt.
Understanding Your Total Debt
There will be times when you want to evaluate your total debt picture, including both good debt and bad debt. The calculation is the same as in the previous example; the only difference is that you will include all your debt rather than just bad debt.
To calculate your total debt-to-income ratio, add up your total monthly debt expenses. This includes payments for credit cards, student loans, mortgage or rent, child support or alimony, and other loans or credit cards.
Next total your monthly income, including take-home pay, alimony or child support, bonuses, or dividends.
Divide your total debt payments by your total income (don’t forget to multiply by 100) for your debt-to-income ratio.
Your total debt-to-income ratio, considering both good and bad debt, is best at 36% or lower. A ratio lower than 30% is excellent, while a ratio over 40% is a red flag for a potential financial disaster.
The Result
If you determine that you have too much debt, Reducing Debt can help you put together a plan to lower your debt, making it easier to manage.
http://credit.about.com/od/reducingdebt/a/toomuchdebt.htm
Saturday, May 26, 2007
How to Make More Money
Your Lifetime Income Potential
Work is about the money. Work only becomes not about the money when you have sufficient income – however you define sufficient income – to support your chosen life style.
With sufficient money to live on, work can then become about making a difference, contribution, sharing an important mission, doing tasks you love, feeling important, making friends, gaining success, pleasing customers, and achievement. All of these goals, that define why people work, come into play when you make sufficient money.
Your Choices Determine Your Lifetime Income Potential
Thus, the amount of money that you want to make, and do make during your lifetime of working, is dependant upon your beliefs, attitudes, values, and career choices.
If you value helping people in need, you can anticipate a particular salary over the course of your career. As long as your values are more important than what you are paid, your choice is fine. But, you cannot set a goal of making a million dollars a year, make a career choice that pays $40,000 per year, and expect to be happy with your career decisions and the money you make over time.
Almost everyone thinks that they should make more money than they do. But the amount of money you are paid by your employer is dependant upon a number of factors discussed in: The Scoop on Salary Increases: What Pay Raise Can You Expect From Your Employer?.
About’s Joshua Kennon tells you: How to Become Wealthy: Nine Truths That Can Set You on the Path to Financial Freedom. I’m writing these tips to help you have the money you need to follow his strategies. He and I agree on the first step you need to take to make more money.
Change How You Think About Money to Increase Income Potential
Money is what you are paid to do a job and accomplish goals for an employer. Or, money is the salary you pay yourself as a self-employed business person. Money is neither the root of all evil nor is it a panacea for all of your pains and the world’s ills. It is simply a tool that allows you to attain the standard of living you choose to pursue.
Money enables you to provide for your family’s basic needs and to raise and educate your children. Money allows you to support philanthropic causes about which you are passionate. Money allows you to travel, purchase items you want in your life, and pursue hobbies and interests that engage you. Money allows you to retire some day if you choose.
Consequently, getting more money is not just okay; it’s fundamental to the plans you have for your life. Asking for a higher salary when you change jobs is expected. Requesting an increase in pay from your current employer is your right. Choosing a career that will pay a higher salary and thus, a higher lifetime income, is all right.
Change How You Think About Yourself to Increase Income Potential
While you don't want to define your character by the amount of money you make, you do need to have the mind set that whatever you can earn, you are worth. If you think of yourself as a $30,000 a year employee, $100,000 is quite a mind leap. Be prepared to make the choices throughout your career that will enhance your ability to earn more money. As an example, asking your manager for a raise can daunt the courage of even the most confident person. Yet, if you never ask for a raise, you are "settling" for what your organization offers you.
Pick Your Career Wisely for Income Potential
Some jobs just pay more than others. If money is important to you, select a career that will pay you what you want to earn. Or, realize that you will have to do something extraordinary to make good money in the career of your choice. You can also moonlight, work a second part time job, freelance, or start your own business. Again, the money you will make during your work career is up to you.
Take a look at these salary calculators to figure out your income potential in various careers. The Economic Research Institute Salary Calculator will even help you figure out lifetime salary potential for jobs.
Obtain the Requisite Degrees and Credentials
People with degrees tend to make more money working in their field than people who do not have degrees.
The lifetime gain in income can be significant. As an example, a person with a bachelors degree in business will earn an additional $349,028 and an engineering degree can bring an employee an extra $500,000. The associates degree brings a huge bump over a high school diploma.
Need convincing? At MSN Money, Liz Pulliam Weston offers convincing information from census records that lifetime income increases with degrees. In addition, according to: The Benefits of Graduate Education, "The lifetime income differentials are magnified when computed over a 40-year career (from ages 25 to 64). Master's degree recipients will earn $2.5 million in their lifetime. Lifetime earnings of holders of professional degrees, at over $4.4 million, are well above that for any other group." (Source: Educational Attainment in the United States, U.S. Census Bureau, Current Population Survey, May 2004.)
Develop Your Career Path With Care for Income Potential
To earn the best salary, if you take a job with one employer, and stay with that employer, you may not maximize your income potential. The job choices you make can also affect your income. Spend time in line management and manage the work of others to grow your income potential. Or, develop a technical skill set that makes you a valued individual achiever.
Ultimately, though, you may need to change departments or employers to earn the highest income. I read recently that an employee who switches companies expects minimally a ten percent increase in salary. Becoming a wanted quantity ups the value of your bargaining chips with your current employer, too.
Take Action to Improve Your Lifetime Income Potential
If you are a quiet, good, hardworking employee who waits for salary increases to be offered by management, you are limiting your lifetime income potential. Actions that you take at work, and over your years of working, seriously impact your income potential.
* Negotiate a potential new employer's initial offer. You may find the offer is not negotiable, but there is little harm in trying - once. You will alienate the employer if you engage in a series of negotiations that escalate your demands as the employer improves your offer. Only about 20 percent of employees negotiate their salary offers or benefits packages. Be one of them to improve lifetime income potential.
* Ask for raises regularly from your manager while you work. Track your accomplishments. Measure the before and after of projects you complete. Demonstrate and point out the value you add to the company's bottom line. Recognize that, despite your best efforts, your employer may have a salary band outside of which he cannot negotiate. Your employer may also have a policy to review salaries annually at a specific time. But, it doesn't hurt to ask; just don't pester.
* Express your career ambitions and the contributions to the company's success you hope to make. Obtain your supervisor's commitment to and help with your career growth and development. You want to be in the succession plan. Every company has a superior employee list - trust me - and you want to be on it to maximize your income potential.
Use these ideas to ensure that you earn the amount of money you want over your lifetime of working. You can maximize your lifetime earning potential. You need to choose to do so; these ideas will help.
Please don’t mistake this article for social commentary about how the world “ought to” value jobs and money; this specific article is about the money. Go get yours. Remember, you're worth it.
http://humanresources.about.com/od/salaryandbenefits/a/life_earnings.htm
Work is about the money. Work only becomes not about the money when you have sufficient income – however you define sufficient income – to support your chosen life style.
With sufficient money to live on, work can then become about making a difference, contribution, sharing an important mission, doing tasks you love, feeling important, making friends, gaining success, pleasing customers, and achievement. All of these goals, that define why people work, come into play when you make sufficient money.
Your Choices Determine Your Lifetime Income Potential
Thus, the amount of money that you want to make, and do make during your lifetime of working, is dependant upon your beliefs, attitudes, values, and career choices.
If you value helping people in need, you can anticipate a particular salary over the course of your career. As long as your values are more important than what you are paid, your choice is fine. But, you cannot set a goal of making a million dollars a year, make a career choice that pays $40,000 per year, and expect to be happy with your career decisions and the money you make over time.
Almost everyone thinks that they should make more money than they do. But the amount of money you are paid by your employer is dependant upon a number of factors discussed in: The Scoop on Salary Increases: What Pay Raise Can You Expect From Your Employer?.
About’s Joshua Kennon tells you: How to Become Wealthy: Nine Truths That Can Set You on the Path to Financial Freedom. I’m writing these tips to help you have the money you need to follow his strategies. He and I agree on the first step you need to take to make more money.
Change How You Think About Money to Increase Income Potential
Money is what you are paid to do a job and accomplish goals for an employer. Or, money is the salary you pay yourself as a self-employed business person. Money is neither the root of all evil nor is it a panacea for all of your pains and the world’s ills. It is simply a tool that allows you to attain the standard of living you choose to pursue.
Money enables you to provide for your family’s basic needs and to raise and educate your children. Money allows you to support philanthropic causes about which you are passionate. Money allows you to travel, purchase items you want in your life, and pursue hobbies and interests that engage you. Money allows you to retire some day if you choose.
Consequently, getting more money is not just okay; it’s fundamental to the plans you have for your life. Asking for a higher salary when you change jobs is expected. Requesting an increase in pay from your current employer is your right. Choosing a career that will pay a higher salary and thus, a higher lifetime income, is all right.
Change How You Think About Yourself to Increase Income Potential
While you don't want to define your character by the amount of money you make, you do need to have the mind set that whatever you can earn, you are worth. If you think of yourself as a $30,000 a year employee, $100,000 is quite a mind leap. Be prepared to make the choices throughout your career that will enhance your ability to earn more money. As an example, asking your manager for a raise can daunt the courage of even the most confident person. Yet, if you never ask for a raise, you are "settling" for what your organization offers you.
Pick Your Career Wisely for Income Potential
Some jobs just pay more than others. If money is important to you, select a career that will pay you what you want to earn. Or, realize that you will have to do something extraordinary to make good money in the career of your choice. You can also moonlight, work a second part time job, freelance, or start your own business. Again, the money you will make during your work career is up to you.
Take a look at these salary calculators to figure out your income potential in various careers. The Economic Research Institute Salary Calculator will even help you figure out lifetime salary potential for jobs.
Obtain the Requisite Degrees and Credentials
People with degrees tend to make more money working in their field than people who do not have degrees.
The lifetime gain in income can be significant. As an example, a person with a bachelors degree in business will earn an additional $349,028 and an engineering degree can bring an employee an extra $500,000. The associates degree brings a huge bump over a high school diploma.
Need convincing? At MSN Money, Liz Pulliam Weston offers convincing information from census records that lifetime income increases with degrees. In addition, according to: The Benefits of Graduate Education, "The lifetime income differentials are magnified when computed over a 40-year career (from ages 25 to 64). Master's degree recipients will earn $2.5 million in their lifetime. Lifetime earnings of holders of professional degrees, at over $4.4 million, are well above that for any other group." (Source: Educational Attainment in the United States, U.S. Census Bureau, Current Population Survey, May 2004.)
Develop Your Career Path With Care for Income Potential
To earn the best salary, if you take a job with one employer, and stay with that employer, you may not maximize your income potential. The job choices you make can also affect your income. Spend time in line management and manage the work of others to grow your income potential. Or, develop a technical skill set that makes you a valued individual achiever.
Ultimately, though, you may need to change departments or employers to earn the highest income. I read recently that an employee who switches companies expects minimally a ten percent increase in salary. Becoming a wanted quantity ups the value of your bargaining chips with your current employer, too.
Take Action to Improve Your Lifetime Income Potential
If you are a quiet, good, hardworking employee who waits for salary increases to be offered by management, you are limiting your lifetime income potential. Actions that you take at work, and over your years of working, seriously impact your income potential.
* Negotiate a potential new employer's initial offer. You may find the offer is not negotiable, but there is little harm in trying - once. You will alienate the employer if you engage in a series of negotiations that escalate your demands as the employer improves your offer. Only about 20 percent of employees negotiate their salary offers or benefits packages. Be one of them to improve lifetime income potential.
* Ask for raises regularly from your manager while you work. Track your accomplishments. Measure the before and after of projects you complete. Demonstrate and point out the value you add to the company's bottom line. Recognize that, despite your best efforts, your employer may have a salary band outside of which he cannot negotiate. Your employer may also have a policy to review salaries annually at a specific time. But, it doesn't hurt to ask; just don't pester.
* Express your career ambitions and the contributions to the company's success you hope to make. Obtain your supervisor's commitment to and help with your career growth and development. You want to be in the succession plan. Every company has a superior employee list - trust me - and you want to be on it to maximize your income potential.
Use these ideas to ensure that you earn the amount of money you want over your lifetime of working. You can maximize your lifetime earning potential. You need to choose to do so; these ideas will help.
Please don’t mistake this article for social commentary about how the world “ought to” value jobs and money; this specific article is about the money. Go get yours. Remember, you're worth it.
http://humanresources.about.com/od/salaryandbenefits/a/life_earnings.htm
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