West Palm Beach Bankruptcy Attorney

Debt-to-Income Ratio and Healthy Debt

The debt-to-income ratio is a wonderful way of determining whether or not you can afford that next big purchase that you have been eying. This number compares the amount of money you earn to the amount of money you owe others. After calculation, the returned percentage indicates how much of one’s income is being used to pay off debts. A lower percentage indicates a better financial standing.

The debt-to-income calculation is a relatively simple equation, but with the amount of numbers that are integrated into it, it may be wise to use an online calculator in order to make this computation more manageable. Basically, to find this ratio, one divides one’s total monthly expenses by one’s gross monthly income. Most people agree on the financial standings indicated by the following ratio ranges:

• 15% or less is a very healthy debt standing
• 35% is about average for most people
• 36-42% indicates a slip away from healthy debt. Moderate management procedures should be taken.
• 43-49% shows that this individual should take action right away in order to avoid large monetary problems.
• 50% or above is a sign that the individual should seek aggressive and immediate – preferably professional – help in order to tackle these money issues.

It is recommended that people check their debt-to-income ratios regularly, since money matters frequently change as bills are paid off, new bills are incurred, and paychecks are distributed.

Contact Us

For more information on how to calculate your debt-to-income ratio, or if you find that your debt-to-income ratio is high enough to warrant immediate attention, please do not hesitate to contact a West Palm Beach bankruptcy attorney of Eric N. Klein & Associates, P.A. at 561-353-2800.