Most people don’t realize how far into debt they are until it is way too late. Creditors use budgeting guidelines when reviewing and approving credit. If your debt exceeds the financial communities recommended guidelines, then you have a higher risk of credit applications being denied.

You don't have to be a financial whiz to understand what's going on with your credit and debt. Just a few simple calculations, and an eye on the future, will go a long way to help you succeed financially and keep your debt under control. Be safe, be smart, and do the math!

Using a few of these basic guidelines and debt calculations, you can see when your debt load is getting into the danger zone.

The following are recommended budgeting guidelines. Your budget should be divided into these proportions:

Housing: 35% - Mortgage or rent, taxes, repairs, improvements, insurance, and utilities

Transportation: 20% - Monthly payments, gas, oil, repairs, insurance, parking & public transportation

Debt: 15% - Credit cards, personal loans, student loans and other debt payments

All other expenses: 20% - Food, insurance, prescriptions, doctor and dentist bills, clothing and personal

Investments and Savings: 10% - Stocks, bonds, cash reserves, retirement, rental real estate, art, etc.

Next you should calculate your debt income ratio. Once you know what your ratio is, you will understand just how important debt load is to your overall financial picture. Your debt income ratio is the percentage of your monthly pay that goes to paying debts.

Calculate it by taking the amount needed to repay debts each month, including rent or mortgage, and divide by your net pay after taxes. Remember, this is debt ratio, so only include actual debt repayment in the calculation.

One little known fact about the Credit to Debt Ratio is the reverse effect it has on your credit score. If you pay off a credit card, and close the account, you are actually negatively impacting your credit score.

The reason for this negative effect is in the calculation of the Credit to Debt Ratio itself. This ratio is the relationship of your debt total vs. your credit limit. You calculate it by dividing the total credit limit of all credit cards and loan accounts by the total of the actual debt (spent total). Now, if you pay off a credit card, you are reducing the actual debt, which is great, but, if you close the account, you are also dramatically reducing the credit limit you have, and usually by a higher percentage than you are reducing debt.

With these budgeting guidelines, you can begin to get a feel of how much you ARE spending each month, and how much you SHOULD be spending each month.

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