Louise’s monthly gross income is $2,800. Her employer withholds $560 in federal, state, and local income taxes and $224 in Social Security taxes per month. Louise contributes $112 per month for her IRA. Her monthly credit payments for Visa, MasterCard, and Discover cards are $44, $34, and $21, respectively. Her monthly payment on an automobile loan is $355. (a) What is Louise’s debt payments-to-income ratio? Im not sure how to answer this as a percent rounded to 1 decimal place. (b) Is Louise living within her means?
Louise’s monthly gross income is $2,800. Her employer withholds $560 in federal, state, and local income taxes and $224 in Social Security taxes per month. Louise contributes $112 per month for her IRA. Her monthly credit payments for Visa, MasterCard, and Discover cards are $44, $34, and $21, respectively. Her monthly payment on an automobile loan is $355.
(a) What is Louise’s debt payments-to-income ratio?
Im not sure how to answer this as a percent rounded to 1 decimal place.
(b) Is Louise living within her means?
Debt-to-income (DTI) ratio is a significant factor in determining overall financial health in addition to credit score. By calculating DTI, a person can assess how comfortable they are with their present debt and decide whether or not it would be wise to apply for credit. A borrower is considered more appealing if they have a low DTI ratio, which indicates that their income is adequate to pay their debt commitments.
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