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What should my debt-to-income ratio be?

Money Tip:

Your debt-to-income ratio should be 36% or lower

👉🏼Your debt-to-income ratio is essentially the percentage of your gross (before taxes) income that goes towards paying debt.

👉🏼The optimal debt to income ratio is 36% or lower. The lower the better.

👉🏼This means if you make $45,000 per year, your debt payments (mortgage, car, loans, etc) should not total more than $1,350 per month.

👉🏼The math: $45,000 * 0.36 = $16,200 Then $16,200 / 12 = $1,350

👉🏼If your ratio is higher than 36% I would work on lowering that number. You can do that by either lowering your debt or increasing your salary. A side hustle can help you increase that salary or cut back on expenses to put towards debt to lower your total debt payments. And if you are really serious about lowering that ratio, you’ll do both.

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