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Home » Business And Finance Articles » How Much Debt Is Too Much

How Much Debt is Too Much?

People have a certain threshold or tolerance for debt. Most of us can tolerate a little bit of debt. How much debt is all right? And when are you in over your head?

Most of the time, the decision that you have "too much debt" is made emotionally. That is, you have too much debt when you feel you have too much debt.

So why do some people panic over small debts but others sleep like babies even when they owe tens of thousands?

The answer is that people have an emotional sense of how much debt is acceptable. The danger is that this personal gauge is highly unreliable. You may have gotten it from your family situation, past experiences, or what you saw on TV or in the movies. Your debt style also involves your own maturity level and self control.

We also have an emotional response to what is unacceptable, which is sometimes called "hitting rock bottom." For some people, hitting rock bottom is having a car repossessed. For others, the repo man was a familiar character from childhood.

Hitting rock bottom may be the day you cannot make minimum payments, the day you lie to a spouse about an overdue bill, or the threat of impending homelessness. In other words, the emotional response and not the event itself is what defines a "hitting rock bottom" moment. One man's rock bottom is another man's standard of living.

So when is debt too much debt? On a purely emotional level, many people hit "rock bottom" when the first calls from bill collectors start to come.

Getting hounded by a professional bill collector is tough. Some people cope, but others find it embarrassing, humiliating, and shameful. For some people, it may take an intervention of friends or family members to drive home the point that the debt is getting out of control. Others may wait till they are evicted or sued.

So how much is too much debt?

First, it's not a question you should answer emotionally. Most entrepreneurs have nerves of steel when it comes to debt and financial risk taking, but most of them do not carry a lot of personal debt. So the amount of debt you can tolerate emotionally is not the governing factor; in fact, it should not even be taken into account.

Debt is financial and the only way to evaluate financial things is to look at the big financial picture.

Your financial report card is something called your "net worth." You can do a reasonably good snapshot of your own net worth without hiring an accountant or doing a bunch of fancy stuff. Just write down all of the money you owe. If you have credit cards, list all the balances. If you have loans, list all of them. If you have a mortgage, add that. Take all of these debts (the accountants would call these "liabilities") and add them together.

Now take everything you own. This includes the contents of any bank or investment accounts you have, your retirement account, stock portfolios, and so on. If you own a house (even if it's mortgaged), add the fair market value of the house. If you have vehicles (cars, boats) add them in. It is fair to add in the value of your furniture, electronics, and clothing, but be very conservative. It may have cost you thousands to build the wardrobe hanging in your closet, but it's doubtful you could convert it to very much cash. Don't count what you spent, count what you could get if you had to sell it today. Add everything together to get what accountants call your "assets."

Now subtract liabilities (what you owe) from your assets (what you own), and you have your net worth.

I hate to disillusion you, but the number should be positive. And it should be thousands.

There are some reasons for a low net worth. For those who are just starting out or those just starting over, your net worth may be low because you have not had chance to amass any assets. You may have just gone through a major medical disaster or other catastrophe. The other reason your net worth may be low is a lot of debt.

Now look at your income and your monthly bills. Don't worry about total debt here, just look at what you spend each month versus what you bring in. Take some pencil and paper time here. Does your out-go exceed your income? That's a debt-making machine. Until you turn this around, you're going to keep your debt growing which, in turn, will keep your net worth negative.

If you can't make minimum payments, if you are adding to your debt each month, or if you are really unsure of your financial states, you are probably in need of some financial help.

Certified credit counselors can help and there are lots of excellent books and programs on the market aimed at getting you debt-free. There are even free resources. For instance, your local banker can probably help you come up with a financial plan to manage your debt, including things like debt consolidation.

If you're wondering if you have too much debt, you probably do. One of the great financial secrets of the truly wealthy is this: no debt. It's possible for even ordinary people to live debt free.

The bill collector or the repo-man are not the first signs of debt problems; they are really symptoms of a prolonged period of too much debt. When the warning signals come, even if we are not rattled by them, we should take firm steps to dig ourselves out of debt. The difference between too much debt and being destroyed by debt are just a few missteps.

And here is another random article you might be interested in...

10 Networking Myths For Newbies-To-Networking

It's a given, isn't it? If you're in business, your number one job is to market. If you keep your business a secret - don't let people know how you can help make their lives better and what you do, you won't be successful - because no one will know that you're in business. How well you network, which is the "letting people know how you can help them" part, may well determine whether you succeed â€" or fail.

There are four main types of organizations where networking opportunities for business owners exist. There are 1) business networking groups, 2) service-oriented groups (Rotary, Elks, Soroptimist, for example), 3) our local Chambers of Commerce, and 4) business-specific groups (realtors-only, coaches-only, etc.)

Which one is best for you? Well, in all of the groups, you are connecting with other business owners, getting to know them personally and professionally, building trust, and forging new relationships that can potentially bring you business. However, with business networking groups, the main focus, the primary objective, is to boost each member's business. And isn't that a great objective?

Business networking groups are "exclusive," meaning that only one member in each category of business can join. So each group will have only one printer, one residential real estate agent, one property manager, one web designer, etc.

For many women getting started in business, the business networking options probably seem abundant. Online, offline, via email, via telephone, groups meeting weekly, groups meeting once monthly. Some are geared specifically towards women business owners; others are not. Some groups are part of a larger network of regional, national and international association, while other groups are home grown. The networking events or meetings are usually structured so that women feel "welcome" and are designed to maximize opportunities to meet others. Sounds good, right?

But what if you've never had to network before? Or if you're an introvert? Like me!

Some people make networking look effortless, but here's a secret: even for the most gregarious among us, networking always requires preparation. Introvert who prepare, practice, practice, and practice can become "Networking Queens." (And don't forget to breathe!) If you're a newbie-to-networking, don't let these common myths about networking de-rail your efforts to become well known in your industry.

Myth #1: Networking groups are only for new business owners.

Truth: Many networking groups who show sustained growth have a majority of members who have been in business at least 5 years.

Myth #2: The only business owners who join networking groups are unsuccessful ones.

Truth: See myth #1.

Myth #3: Men don't join networking groups.

Truth: In the small county I live in, men started 1/3 of the business networking groups. One group is a women-only group and the other groups are a mixture of both men and women.

Myth #4: Only home business owners or solo business owners join networking groups.

Truth: Home business owners join groups quicker because they're looking for community outside their homes. However, many bricks 'n' mortar businesses join networking groups and do extremely well, too.

Myth #5: Only business owners join networking groups.

Truth: Professionals, usually executives and agents who work for existing companies, join to promote their companies'

services and/or products, too.

Myth #6: Multi-Level Marketing folks are not welcome at networking groups.

Truth: If you are an MLM-er and attend meetings to sell your products, you'll get a warmer reception if you're there to talk about your products â€" not to increase your downline.

Myth #7: Dues are so very high.

Truth: Membership dues vary from group to group - some groups have no dues and others charge dues of $500 per year. Find a group that fits your needs or start your own!

Myth #8: You must refer to those you meet at your meetings

Truth: No one wants to refer people they don't know well, so your goal at these meetings is to get to know other members until you're comfortable referring them. Sometimes, you may have another associate/friend outside the group that you refer instead of, or in addition to, one of your networking partners.

Now, while you're usually not "required" to refer a particular person, remember that referring business to other members is part of the business networking process. (In a few groups, not referring others is a big "no-no" and you will be asked to leave; ask about the rules before you join.)

Myth #9: You must attend all meetings.

Truth: The commitment of your time and talents to a group is very important, since you'll be part of a team of business owners. In some groups, you - or a representative - must attend all meetings. Most groups have a 75% mandatory attendance of its members. A rare few groups have no attendance rules.

Myth #10: I have to join right away.

Truth: Each group has its own "flavor." Many groups allow you to attend two meetings as a guest before you have to decide to join or not. Pretty fair rule!

The bottom line is this: People like to do business with people they know and trust. Relationships -- business and personal -- take time to develop. Remember that networking isn't about instant gratification - it's about long-term partnerships. The opportunities are numerous â€" business networking groups are varied enough so that any woman can find at least one group that feels like "home." Or two... or three...

So go grab a cup of coffee and visit the list of online and offline networking groups I've compiled over the years. It's time to get out and become a Networking Queen! If I can do it, you can, too!
http://www.coachmaria.com/business/networking.html