Fiscal Agents Financial Tools
Total Debt Worksheet |
 |
When planning for the future, the
amount of debt that you have incurred is just as important as the income
that you earn. When debt is unmanageable, it can prevent you from achieving
your goals as well as restricting you from being able to obtain financing
in the future. For many of us, debt reduction is one of the most important
financial goals in our lives since it frees up funds to be used towards
other goals.
The key to reducing debt is to minimize
interest costs by making frequent and continuous payments. Use the Total
Debt Worksheet, below, to determine the amount of debt you currently owe
in order to asses how well you are managing it. This will also be a good
indicator of how well equipped you are to handle additional debt.
When calculating the amount you
presently owe, you should take all types of debt into consideration including
credit cards, lines of credit, bank and car loans, and mortgages to name
a few.
What
does your Total Debt Service (TDS) ratio mean?
As a general guide, financial institutions consider a Total Debt Service
(TDS) ratio to be favourable if it is less than 40%. This however, does
not mean that you will automatically be approved for a loan or financing
just because your ratio is below this level. Financial institutions look
at several other factors, including credit ratings, when considering loan
qualifications. Your Total Debt Service ratio simply represents your ability
to service, or handle, your current debt.
If you find that your ratio is above
the 40% level, you should concentrate on finding ways to reduce your present
level of debt. Our Tips for effective debt management contain a
wealth of information on ways to regain control of your debt. Taking the
time to map out your monthly expenses can also help you to identify areas
in which you may be able to save money - money that can be put towards
your debt reduction plan.
| 
