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20-10 Rule Example

Multiply your monthly after-tax income by 12 to get your annual after-tax income. Then, multiply that amount by 20%. If you bring home $5,000 per month or $60,000 per year, your total annual debt should be no more than $12,000.

Does the 20 10 rule apply to all types of credit?

The 20/10 Rule: What are not included in these limits? Mortgage loans and monthly payment commitments for housing are not included in these limits. -However, all other types of borrowing are included in the limits of the 20/10 Rule.

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How much debt can they safely carry?

As a general rule, your total debts (excluding mortgage) should be no more than 10 percent to 15 percent of your take-home pay (meaning, after you take out taxes and the like). If you're not likely to incur any additional debt or unexpected expenses, you may be able to handle upward of 20 percent.

How Much Debt Is Too Much? – SavvyMoney Blog

What is a 20 10 rule?

What is the 20/10 Rule? To begin, the 20/10 rule is a conservative rule of thumb for other consumer credit , not counting a house payment. What does this mean exactly? This means that total household debt (not including house payments) shouldn't exceed 20% of your net household income.

The 20/10 Rule – A Finance Rule For Credit Guidance - Credit ...

When creating good credit what is the 20 10 rule?

A conservative rule of thumb for other consumer credit, not counting a house payment, is called the 20/10 rule. This means that total household debt (not including house payments) shouldn't exceed 20% of your net household income. (Your net income is how much you actually “bring home” after taxes in your paycheck.)

The 20-10 Rule for Consumer Credit