Two Steps To Answer This Question: How Much Debt Is Too Much?

You want to keep the percentage of debt in your household below 36%.  Here's how to calculate that number:

1. Add up what you owe monthly on all of your loans.  This includes your mortgage, property taxes on your home, insurance on your home, home equity line of credit, car loans, student loans, and minimum payments on your credit cards - any loan that you have. 
2. Divide this amount by your gross monthly income (the number before taxes and other deductions are made).

• For example:

Monthly gross income- $2,000

Monthly debt- $500

$500/$2000 = 0.25

This debt to income ratio is 25% in this example, well below the 36% recommended maximum. 






Take Action:

• Total up the monthly payments on your loans
• Do the math
• If your percentage is higher than 36%,  look at how you can reduce your non-loan monthly expenses

Good luck with it!


 

Copyright 2012    Connie Livingston                  All rights reserved