What is Debt-to-Income Ratio and Why Calculate It?
When managing finances, it’s important to get a grip on just how much you’re bring in vs. spending. By tightening up on spending, you can make sure to reduce frivolous debts and avoid adding on more. But before you reach this stage, it’s a good idea to find out where you’ve gone wrong so that you can make necessary improvements. A great way to get this done is by calculating your debt-to-income ratio. This ratio is a configuration of how much you bring in versus how much you spend in fixed payments each month. Once the ratio is calculated, you can determine whether you’re managing your finances correctly. Calculating Your Debt-to-Income Ratio The first step in making this calculation is adding up your monthly fixed expenses, including house payments or rental leases, revolving credit balances, car payments, alimony, child support, etc. Some items that should be excluded from the list include items that can be paid off in a couple of months or less, including utilities or grocery bills.
When managing finances, it’s important to get a grip on just how much you’re bring in vs. spending. By tightening up on spending, you can make sure to reduce frivolous debts and avoid adding on more. But before you reach this stage, it’s a good idea to find out where you’ve gone wrong so that you can make necessary improvements. A great way to get this done is by calculating your debt-to-income ratio. This ratio is a configuration of how much you bring in versus how much you spend in fixed payments each month. Use a loan calculator to break down your monthly payments if needed. Once the ratio is calculated, you can determine whether you’re managing your finances correctly. Calculating Your Debt-to-Income Ratio The first step in making this calculation is adding up your monthly fixed expenses, including house payments or rental leases, revolving credit balances, car payments, alimony, child support, etc. Some items that should be excluded from the list include items that can be paid off
