Looking at Your Spending and Debt

Your Consumer Debt Ratio

Your consumer debt ratio is your monthly take-home pay divided by your monthly consumer debt payments, expressed as a ratio. For this calculation do not include your mortgage, rent or home equity payments, or credit card expenditures that you pay in full each month, but do include all other monthly debt payments: car and truck loans, credit card balances, personal loans, school loans, and installment debt.

Here's an example of how to calculate it:

Car/vehicle payment


Credit card payments


Student loan payments


Other loan payments


a) Total consumer debt payments
(add all of above)


b) Monthly take-home pay


Consumer Debt Ratio =
a) divided by b)


Do You Have Too Much Debt?

  • If your consumer debt ratio is 10% or less, you are borrowing wisely.
  • If your consumer debt ratio is between 10% and 20%, you are borderline.
  • If your consumer debt ratio is over 20%, you may have serious debt problems. Only 5% of the population owes such a high percentage of consumer debt. Stop using credit. Stop spending unnecessarily.
  • If your consumer debt ratio is over 25%, GET HELP NOW! You need to make changes immediately. You may want to get debt counseling by professionals.

SUGGESTION: The Consumer Credit Counseling Service (CCCS) is a not-for-profit agency that provides credit counseling. Contact the National Foundation for Credit Counseling (NFCC) toll-free at 1-800-388-2227 or online at www.nfcc.org to locate a local CCCS office.

IMPORTANT NOTE: Interest rates on consumer debt can be hazardous to your financial health. If you have $10,000 of credit card debt at 18%, and you are paying it off at the rate of $200 per month (and not adding to it), it will take you almost eight years to pay it off. If the rate is only 10%, it will still take you about five and one-half years.

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