Jakarta, CNBC Indonesia – News about the financial problems faced by the family of the late Sumargono (Gogon), is still being discussed in the media. As is known, the Gogon family is struggling to pay off debts that reach billions of Rupiah.

“The interest is also scary, it's more than the bank, you know. A loan of Rp. 1 billion, if you think about it, it's already more than 2 (Rp. 2 billion). Finally, we talked amicably (with the loan shark), 'When it's called like that, if you want to go to the legal realm, then go to law “The loan shark's name is 'nekak gulu,' (strangling the neck), trap the flowers, it's better to just sell (the house),” said Gogon's son, Nova, in Inserthilite.

The Gogon case certainly provides valuable lessons about the dangers of owing money to loan sharks and the importance of managing debt. When the debt taken has not been paid off, the heirs will be the party responsible for this.

Therefore, before going into debt, you must know what your own reasonable debt limit is. Here's how to assess the health of your debt.

Ratio of debt installments to income

You may often hear financial advice that says that the maximum safe installment is 30% of income. The 30% value is the debt to income ratio.

When your installments exceed 30% of your income, you will have difficulty meeting your daily needs, saving and investing.

It is worth noting that the 30% value itself is the value of the “entire debt bill.”

For example, you have a mortgage installment equal to 20% of your income, and you intend to take out a new car loan. You must ensure that your new car installments do not exceed 10% of your income.

Debt to asset ratio

It's possible that your debt installments are still within reasonable limits, but not your total debt.

To find out whether our debt is too big or not, you can use the debt to assets ratio. This ratio value will measure the amount of unpaid debt, compared to the total assets we own.

The formula to find the value of this ratio is:

Total Debt x 100%

Total Assets

The maximum value of this ratio is 50%.

If your ratio value is above 50%, then you should be alert because the total value of your debt is more than half of your total assets.

Just imagine what would happen if you lost your income and you still had to pay off those debts? Your total assets will decrease drastically because you have to sell them to pay off these debts.

And if most of your debt is consumer debt, then this is also quite dangerous because consumer debt will only erode your wealth.

[Gambas:Video CNBC]

(aak/aak)