What is your personal debt ratio? Understand how to calculate it
Have never positive debt. In the meantime, using or index of endorsement, you can see how your penance is financed by committing to your financial education and your household, for example.
Therefore, in order to be able to organize and plan financially, a good first step is to be attentive to your personal debt index.
Or what is the index of weight loss?
Or index of personal debt, or not “debt to equity ratio”, the metric used to quantify part of its personal budget that is compromised by living. The higher this index value, the more of your budget will only be consumed by living people.
Therefore, when calculating it, you’ll be able to get a new endorsement, and assimilate, to develop strategies for diminution. In addition to the index of debt, there are several other indices that demonstrate or impact on the financial finances of the company.
How to calculate or index personal debt?
To know how to calculate or index personal endorsement is not Necessary mathematical advanced. The formula for index of personal debt is: the reason between the obvious messages and the recited messages multiplied by 100 and the result and demonstrated in percentage.
Personal Debt Index = Divided Messages (Passive) / Monthly Recipe (Active) x 100
Do not give a heavy personal field, all types of financial commitments, such as:
- Dividive of credit card;
- You rents;
- Among other things planned.
On the other hand, do not give recipes, you must be somatic:
- Fixed recipes;
- Any type of extra benefit;
- Income from investments;
- Other forms of receipt.
Exemplary calculation of the personal indebtedness index
To understand this calculation, I assumed the following situation:
Joseph has the following financial obligations (lively), planned for or next month:
- Invoice of the credit card: $ 300.00;
- Car performance: $ 500.00;
- Apartment rental: $ 800.00;
- Other: $ 500.00.
Therefore, the hard messages of Joseph will be of $ 2,100.00
In the meantime, no side of recipes, for more or less, Jose will receive:
- Salary: $ 3,000.00;
- Benefits: $ 1,000.00;
- Other: $ 1,500.00.
So Jose’s prescription for this month will be $ 5,500.00
That is, or Joseph’s indebtedness index will be 2,100 divided by 5,500. This will result in an indebtedness index of approximately 38%.
Interpretation of the debt index staff
In the case of Joseph, 38% of his prescription is being compromised by the living. It gives you notice that it has already exceeded or limited tolerance of indebtedness.
The index rating may differ, depending on the professional one that is being analyzed.
In the meantime, there are some who consider that they are practically unanimous for certain values of the capital endurance index. Are they:
- Up to 30% rates: This is still a manageable debt, but it is very important not to say that this value will increase and remove the debts;
- Indices from 30% to 35%: First step to burn this level of endorsement and keep it deferred to a manageable level;
- Indices from 35% to 40%: This situation is already at high risk. It is, at this time, there is no debt redemption action, person will run great cliffs of default;
- Above 40%: This level is more alarming. As the goal of its development is destined to lively, it is practically impossible to remove as financial finance. In such cases, the person has already lost control of his finances, and in a nefty will enter ball snow.
Regardless of the endorsement level, or always recommended, it will be a priority for discharge and debt assessment.
For a person like Joseph, who fears 38% of his life committed by the living, will be relieved of them, it would represent a huge financial comfort and the possibility of committing to investing and investing.
Finally, it is worth recalling that the index of personal endorsement is the last recourse of financial management. It was a matter of time and time to get rid of them in order to organize and organize financially, I must always analyze and update this personal indicator.