Are You In Over Your Head?
Are you in over your head?
Calculate your debt-to-income ratio
The amount you owe is relevant only when measured against your income. The more you make, the more debt you can afford to take on. Fill in the blanks to get a rough idea of your debt-to-income ratio—and whether it is already higher than is considered manageable on your income.
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Monthly mortgage or rent: |
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Minimum monthly credit card payments: |
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Monthly car loan payments: |
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Other loan obligations: |
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A. MONTHLY DEBT PAYMENTS: |
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Annual gross salary: |
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Bonuses and overtime: |
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Other income: |
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Alimony received: |
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B. TOTAL (before tax, divided by 12): |
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A ÷ B = |
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Your debt-to-income ratio
36% or less: This is a healthy debt load to carry for most people.
37%-42%: Not bad, but start paring debt now before you get in real trouble.
43%-49%: Financial difficulties are probably imminent unless you take immediate action.
50% or more: Get professional help to aggressively reduce debt.
Source: Gerri Detweiler, author of The Ultimate Credit Handbook
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