What is the average percentage of a typical American's gross income that is used for mortgage and consumer debt payments each month?

According to the Federal Reserve, Americans spend about 11.89% of their monthly gross income on mortgage and consumer debt payments. Homeowners (those who specifically purchased homes with mortgages) spend about 15.27% of their monthly gross income.

Why is debt management important to an investor?

There are many reasons why managing your debt is an important component of investing. All debts carry some sort of obligation and fee associated with the use of the money. In addition to the principal that needs to be repaid by a certain date, so do all fees and interest on the debt. In order to repay this debt, money that would normally be invested from your current earnings must be redirected to pay off this debt. So you lose both the current earnings and the potential to earn more on this money if it were to be invested.

What is the hidden cost of debt to an individual investor?

The hidden cost of debt to the individual investor is the opportunity cost or lost opportunity of using money that could have been invested earning some return, in order to pay off debt and interest charges.

What are some warning signs that my debt may be a problem?

According to the U.S. Department of the Treasury, many signs that help evaluate the health of a financial institution are relevant to individuals as well. Among these warning signs are failure to file taxes and other financial statements in a timely fashion; slowing or decrease in one's income over time; deterioration of our available cash; decline in our assets as percentage of our total assets (e.g., the value of our principal residence and its equity declines); our debt increases; and keeping poor financial records (not knowing our current financial situation).

 
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