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A reader earns a lot but spends a lot. When should she decide enough is too much?

Question: My mother is horrified that I usually have around $10,000 in balances on two credit cards plus several department store cards. But I make more than $100,000 a year, which is a lot more than my father made during any year he was working.

My father died last year, leaving my mom very little money but also no debt. He never owned a credit card, and my mom never worked. So I think she just doesn’t understand how the world works today, and that everyone has “too much credit card debt.” How do I convince her I’m doing OK?

— Karen in Vermont

Howard Dvorkin CPA answers…

You’re right about one thing, Karen: Debt is how the world works today.

Sadly, 77 million Americans — that’s 35 percent of all adults with a credit file — have a debt that’s gone into collections.

I’m not so sure I can back you up on everything else.

That $10,000 in credit card debt represents 10 percent of your income. If you consider that your debt to income ratio should be under 15 percent, you’re pushing it. Do you have a car loan? Student loans? You didn’t mention these in your question above, so I’d suggest you use our Debt to Income Ratio Calculator to learn this crucial stat.

If your DTI exceeds 15 percent, then your mother is right: Your credit card debt is a problem. Regardless, even if you have no other debts, I’m still concerned.

As a financial counselor for more than two decades, I’ve seen millionaires flying high and then hitting bottom. You simply can’t guarantee you’re always going to earn six figures. If you get laid off, Karen, do you have an emergency fund that can pay your bills for 3-6 months?

Are you saving for retirement? As I’ve written before, the best way to save for retirement is to retire your debts. The interest you save is free money.

I strongly urge you to read our step-by-step guide to get out of debt. It’s free and so is the advice. However, if you don’t have the time, you can always give us a call. Debt.com has certified credit counselors who can give you a free debt analysis, and you can decide from there who’s right – you or your mom. Call us at 1-888-503-5563.

Is credit card debt keeping you from success? Learn how to get your debt under control.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC