The
MARKET DOG
Economic Research & Planning
Debt Ratio Guidelines
Total Debt
Debt Ratio dividing monthly total debt payments by Gross Monthly Income
less than
36%
Guideline
Monthly Payments
Mortgage/Rent
Credit Card
Auto loan
Other Loans etc.
Divided by
Gross Monthly Income
Housing Debt
Debt Ratio that divides monthly housing expenses by Gross Monthly Income (GMI)
less than
28%
Guideline
Monthly Payments
Monthly Mortgage/Rent Payments
Divided by
Gross Monthly Income
Consumer Debt
Debt ratio that divides monthly consumer debt payments by Net Monthly Income.
less than
20%
Guideline
Monthly Payments
Monthly
Credit Card Payments
Divided by
Net Monthly Income
Gross Monthly Income
Before tax income
Net Monthly Income
After tax Income
Debt Reduction/Elimination Strategies
Snowball
Debt reduction strategy that allocates surplus funds to paying down the smallest debt balance first.
This method builds momentum as the smallest debts are eliminated increasing surplus funds to be applied to the next smallest balance.
Avalanche
Debt reduction strategy that allocates surplus funds towards the debt balances with the highest interest rate.
This allocation strategywill most likely save you the most money by extinguishing high interest debts and stemming the negative accumulation of debt and the detrimental effects on your life from ever-growing debt balances.
Bankrupcy
Personal Bankruptcy Chapter 7 and Chapter 13