Use the 20 percent rule to determine whether you can afford to add more debt to your family's spending plan. By making some simple calculations, you can determine the amount of credit you can afford.

			Example
1.	Your monthly take-home pay	$______	$1,000
2.	Multiply by 20 percent	x 0.20	x 0.20
3.	Maximum acceptable debt per month	$______	$ 200
4.	Your present monthly debt obligation	$______

Compare lines 3 and 4. If your present monthly payments are greater than your maximum acceptable debt limit, you cannot afford to add more. If the monthly debt payment is less than the maximum allowable debt limit, you may be able to afford more debt if you so choose.

Credit can be a great temptation because it is so easy to get and use. Purchasing something on credit means that you promise to pay for the item in a responsible manner. Before individuals and families add to their credit load, they should plan ahead and ask themselves the following questions:

• Is this something we really need?

• Can we afford additional debt right now?

• Have we shopped around for the best price and terms?

• Do we understand the terms of the contract?

• What happens if we cannot make the payments?

• Would we be better off to wait and save for the item?

• If buying an item on sale, will the amount of interest you pay plus the sale price of the item still be significantly less than paying full price with cash?