#ArgelAnswers: How much debt is too much debt?


I’ve been invited to talk about Financial Planning, Personal Finance, and Money Management in front of government employees.

In De La Salle University, I was invited to give a talk to public school teachers.

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I was also invited to give a talk to the employees of the Department of Health.

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I found out that one of the common personal financial problems of employees and professionals is getting out of debt.

But before getting out of debt, we have to recognize if we really are in too much debt.

How much debt is too much debt?

In personal finance, there is such a thing called Debt-to-Income Ratio.

This ratio determines if you are in a healthy amount of debt.

To get the ratio, simply divide the total monthly debt payments by your gross monthly income.

For example, consider Juan who has a home loan and a car loan.

His home loan monthly amortization is 10,500 and his car loan monthly payment is 7,000.

His total monthly debt payment is 17,500.

Juan’s gross monthly income is 50,000.

Dividing 17,500 with 50,000 results to .35 (35%)

How do we interpret the Debt-to-Income ratio?

You can do this simple formula on your own situation.

The healthy ratio range is less than .30 to .35 (30% – 35%)

If your debt-to-income ratio is above this healthy range, you are over leveraged.

You need to cut down your debt and/or increase your income.

Being over leveraged is risky especially if you are the breadwinner of the household.

Any unforeseen expenses may make you default on your loans.

Carefully consider adding extra income or changing to a more lucrative career.

If you want to explore the awesome career of being a Financial Adviser, message me here and I’ll help you get started!

To our success in all areas of life,

Argel Tiburcio, CIS, RFP Graduate Member
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When he is not busy watching cooking shows or playing 1st person shooting games, Argel consistently invests in the stock market, tinkers with his websites and reads a lot of books. He also helps Pinoys create, manage, grow and protect their wealth as a licensed financial advisor. Get in touch with him by sending an email to contact@argeltiburcio.com

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