Americans who want to maintain their standard of living should be careful not to follow the example of Uncle Sam by borrowing beyond their means to repay. But when you get to the point where you are prioritizing the bills, having to make choices about what to pay, you know that you are in real trouble.
It’s been some time since we’ve heard the constant barrage of news stories about the federal debt ceiling, a concept that is also an important line for households to draw. By establishing budget guidelines and a maximum amount of debt that can be responsibly managed (a debt ceiling), consumers can make great strides to becoming more financially secure.
Establishing a Ceiling
Before you can begin to plan a workable budget, you need to establish your personal debt ceiling, which is the maximum amount of debt you will allow. While it’s an arbitrary number, it’s a key to keeping debt under control with enough extra to put some away for a rainy day. Depending on how much you want to invest or save, decide on a maximum percentage of your total household income that you will be willing to use to pay for discretionary and non-discretionary expenditures. Keep in mind that a debt ceiling is not a static figure but changes whenever income raises or lowers.