Are you struggling to keep up with your debt payments?
If so, the 20/10 rule may be the solution you need. This simple and effective technique suggests that your debt payments should only take up 20% of your annual net income and 10% of your monthly net income, including credit card, auto, and student loan debt.
The 20/10 Rule:
The 20/10 rule of paying debt is a guideline for managing your debt payments. According to this rule, you should aim to keep your total monthly debt payments (including credit cards and loans) at or below 20% of your monthly take-home pay. Also, you should aim to pay off all of your debt within 10% of your monthly take-home pay each month.
For example, if your monthly take-home pay is $3,000, your total monthly debt payments should not exceed $600 (20% of $3,000). You should aim to pay at least $300 (10% of $3,000) toward your debt each month.
By following this rule, you can ensure that you’re not overpaying or underpaying your debts, and limit your borrowing amount. However, it’s important to note that this rule may not be practical for mortgage payments.
If you have student loan debt, it may also be more restrictive, but it’s not impossible to use. Simply avoid taking on additional debt while paying off your student loans using the 20/10 technique. So, if you’re ready to take control of your debt and ease your financial worries, give the 20/10 rule a try. You can calculate the amount yourself or use a 20/10 budget calculator to find your exact maximum debt payment.