Why is debt management critical to the financial planning process?
It is important for you to have the capacity to pay for unplanned purchases, to withstand a change in income or employment and to meet other financial goals, such as early retirement or funding your children’s education. By assessing your current debt situation, you will be in a better position to assess how well you are managing your current debt and how well prepared you are to handle further debt. • How do I determine my current debt situation? The first step is determining how much you owe by completing the Total Debt Worksheet. These payments help determine Total Debt Service (TDS) Ratio. Financial institutions will use the TDS ratio to measure your current debt situation when assessing all credit applications. As a guideline, your Total Debt Service Ratio should be less than 40%. • What is an emergency fund and do I really need one? Financial Planners recommend that you save at least 3 to 6 months of your income in the event of an unplanned purchase, loss of income or major repai
