After taxes, you’ll be bringing home $33,900 each year, and your take-home pay will sit around $2,825 per month. Say your salary is $40,000 a year and you’re a resident of the state of Texas. By using your net pay after taxes, you get a more realistic picture of how much you’re earning and how much debt you can really afford. The goal of the 10/20 rule is to take a look at the actual income you’re bringing in and determine the amount of debt you should be carrying. Personal loans? Now you’re catching on! If you’re really feeling weighed down by consumer debt and your bank account is feeling the strain, then the 10/20 rule just might be worth considering. So what is included? Any other consumer expense. Don’t factor in your FedLoan or mortgage payments. Very important - these figures exclude real estate debt. The idea is to keep your total debt at or under 20% of your annual income, while maintaining monthly payments at no more than 10% of your monthly net income. While it’s technically a rule of thumb as opposed to an enforceable decree, the 10/20 rule is a system of budgeting that can work for virtually anyone. If you’re looking for a bona fide way to manage your expenses, take a look at what the 10/20 rule can do for you. Look, the economy can cause us all to feel a little unnerved, but there’s never been a better time to lock in a budget, plan ahead, and find ways to improve your financial health. Prices at the pump have oscillated from affordable to wildly expensive, the federal interest rate has increased, groceries are costing more, and nearly 64% of Americans are living paycheck to paycheck. We’re quickly nearing the end of 2022 - a year that has featured quite a few ups and downs for people across the United States.
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