![]() ![]() "You might be more motivated to invest your disposable income than pay off your mortgage or student loan debt," says Leslie Tayne, a debt-relief attorney at Tayne Law Group. You should consider your income, the type of debt you have, your savings and your broader financial goals. Like most rules of thumb in personal finance, Boneparth warns that how much you spend each month to pay off your debt is ultimately subjective. By far, the top source of debt after mortgages is credit cards, accounting for more than double any other debt source. adults aged 18-plus who carry debt, 30% of their monthly income on average goes toward paying off debt other than mortgages. The latest findings from Northwestern Mutual's 2021 Planning & Progress Study reveals that among U.S. Data shows consumers are spending close to that just on non-mortgage debt. "From a lender's standpoint, they typically don't want to see more than 36% of gross monthly income being spent on debt," says Douglas Boneparth, CFP, president of Bone Fide Wealth and co-author of The Millennial Money Fix.ĭon't stress too much if your debt-to-income ratio is higher than 36% if you factor in your mortgage - you're not alone. Then multiple by 100 to get the percentage.įor example, say your gross monthly income is $6,000 and you have $2,000 in debt payments each month across your mortgage, auto loan and student loans. To calculate this number, divide your total monthly debt payments (mortgage, credit cards, student loans and car loan payments) by your gross monthly income (your total income before taxes or other deductions are taken out). Make sure that no more than 36% of monthly income goes toward debtįinancial institutions look at your debt-to-income ratio when considering whether to approve you for new products, like personal loans or mortgages. ![]() "Assuming that your mortgage or rent are going to consume the lion's share of that category, I recommend keeping credit card payments below 10% of your monthly take-home pay if you aren't in a position to affordably pay off your entire balance each month," he says. Carrying a credit card balance month over month can get very expensive because of the high interest charges (usually in the double digits), so it's important to pay it off as quickly as possible.įor those who can't afford to pay off their credit card balance in full, McClary advises working toward a goal of putting 10% of your income toward this debt each month. If you carry credit card debt, Bruce McClary, a spokesman for the National Foundation for Credit Counseling (NFCC) recommends you prioritize credit card payments in the "needs" spending category. He recommends keeping your mortgage payment under 30% of your income to ensure you have plenty of room in your budget for the rest of your needs. ![]() So if you bring home $5,000 per month (before taxes), your monthly mortgage payment should be no more than $1,400. ![]() Investing +More All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs Bonds Help for Low Credit Scores +More All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score Taxes +More All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds Small Business +More All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business Personal Finance +More All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief Best Mortgages for Average Credit Score.Best Loans to Refinance Credit Card Debt. ![]()
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