Rather go to bed supper less than rise in debt – Benjamin Franklin
We hear stories of people going broke all the time due to various reason like lifestyle factors (too much debt), unexpected events (medical expenses, job loss, divorce etc..) systemic Issues (inflation, In this article we discuss the debt and how to avoid going broke with simple ration debt to income ratio (DTI).
Debt To Income Ratio – keep below 10% to 36%
The formula to calculate debt to income ratio is divide monthly total net income by month debt payments (loans, credit card..) Usually gross income is used personally I will use net income because that’s the actual cash in hand.
Example
If your monthly debt payments total $2,000 and your net monthly income is $5,000:
($2,000 / $5,000) * 100 = 40% Debt to income ratio (DT)
Keep tracking of Debt To Income Ratio every month you can avoid going broke by course correcting the mistakes.
Disclaimer –
“Believe nothing, no matter where you read it, no matter if I have said it, unless it agrees with your own reason and common sense.” – Buddha