Calculating Debt to Income Ratio
Calculating your Debt to Income Ratio is actually pretty simple. Grab your little list of debts (or big list), add all of them up so you have the monthly total – you’ll need that number in a second. Next figure out how much money you have coming in each month (add up all your sources of income). You’ve already completed two of the three steps. Now comes the easy part.
Step 1: Add up all your monthly debts (I know you already did this, but I’m just making sure!) Mortgage payments (including taxes, insurance, PMI, etc.), Car payment(s), Minimum credit card payments, Student loans payments, Child support, Doc bills, etc.
Step 2:Add up all your monthly income. Add your Salary, any additional bonuses, tips, any additional income you receive through dividends, a side business, embezzlement, theft, or whatever your case may be. Total these all up and you have your monthly income.
Step 3: If you don;t have your calculator out yet you’ll want it for this part. First type in your monthly debt number, press the “divide” key, now enter your monthly income number, press the “equal” button. That will give you a decimal number, now move the decimal point two places to the right and you have your debt to income ratio. For example, if you came up with a $2,800 total debt payment number and monthly income of $4,500, that leaves you with a debt to income ratio of 52%.
There you go thats pretty much it. Now see my post Debt to Income Ratio and see how you measure up.
...."so when I got home we had a talk and decided this money situation had to change. I didn’t know how I was going to change it, we were barely making enough money to cover the monthly payments so how the H-E-double-hockey-sticks was I going to fix it?"