You will begin by entering in what your monthly income is. This is your net income that you make during a month period. It is best to use net income instead of gross income because you will make all of your monthly debt payments with money after taxes have been taken out.
If you have a part time job or you’re earning extra cash by odd jobs, then just click on add monthly income to add additional income types. Various income types can include:
- Government assistance
- Your income
- Your spouse’s income
- Retirement or pension benefits
- Child support or Alimony
- Other income
Inside of the next section, you will have total monthly debts. These debt types may include:
- Furniture, appliance, or other payments
- Dental or medical bills
- Student loans
- Credit cards
- Child support or alimony
- Health insurance
- Car insurance
- Car loan
- Mortgage or rent
Once this is done, click to add your debts. You can add as many as you like.
Once all of the fields have been filled in, click on calculate. This will compare your debt payments to your income for the month.
Whenever your DTI or debt to income ratio is too low, then you can pay your bills and hit financial goals. Whenever that ratio is high, then you will be spending too much money and will be left with very little left to be saved.
In the results area, you will see a pie chart that talks about your DTI ratio. This will show your ratio, income and debts. This is how your DTI ratio is rated:
- Dangerous: 50% or more
- Cause for concern: 43% up to 49%
- Manageable: 37% up to 42%
- Good: 36% or under
If you aren’t sure which solution is right for you, then click below your results to get a free estimate for savings.
It is important to understand that having a high DTI ratio may not cause concern at all. It will depend on how old you are and where you stand in your career.
For instance, if you are a millennial who purchase a new home and you still have peak earning years ahead, then it is expected and understandable that your DTI ratio be high. You should be able to manage that as long as the interest rates do not increase and you are able to increase your pay.
But, if you are a baby boomer who is on a fixed income or fixing to retire, then having a high DTI ratio can be a cause for concern and would need to have more attention to get any debts you have under control.
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