Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.
The 20/10 rule of thumb limits consumer debt payments to no more than 20% of your annual take-home income and no more than 10% of your monthly take-home income. This guideline can help you limit the amount of debt you carry, which is important for your financial health and your credit score.
While the average American has $90,460 in debt, this includes all types of consumer debt products, from credit cards to personal loans, mortgages and student debt.
About 52% of Americans owe $2,500 or less on their credit cards. If you're looking at $5,000 or higher, you should really get motivated to knock out that debt quickly.
Kevin O'Leary, an investor on “Shark Tank” and personal finance author, said in 2018 that the ideal age to be debt-free is 45. It's at this age, said O'Leary, that you enter the last half of your career and should therefore ramp up your retirement savings in order to ensure a comfortable life in your elderly years.
Many people would likely say $30,000 is a considerable amount of money. Paying off that much debt may feel overwhelming, but it is possible. With careful planning and calculated actions, you can slowly work toward paying off your debt.
Compared to 2021 standards, respondents to the 2020 survey described the threshold for wealth as being a net worth of $2.6 million.
It's not at all uncommon for households to be swimming in more that twice as much credit card debt. But just because a $15,000 balance isn't rare doesn't mean it's a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
In general, you never want your minimum credit card payments to exceed 10 percent of your net income. Net income is the amount of income you take home after taxes and other deductions. You use the net income for this ratio because that's the amount of income you have available to spend on bills and other expenses.
The average debt for individual consumers dropped from $6,194 in 2019 to $5,315 in 2020. In fact, the average balance declined in every state.
Generally speaking, most mortgage lenders use a 43% DTI ratio as a maximum for borrowers. If you have a DTI ratio higher than 43%, you probably are carrying too much debt because you are less likely to qualify for a mortgage loan.
In 2021, the median household income is roughly $68,000. An upper class income is usually considered at least 50% higher than the median household income. Therefore, an upper class income in America is $100,000 and higher.
In the U.S. overall, it takes a net worth of $2.2 million to be considered “wealthy” by other Americans — up from $1.9 million last year, according to financial services company Charles Schwab's annual Modern Wealth Survey.
Six months to two years: Well-off. Two-to-five years: Wealthy. Five or more years: Ultra-wealthy.
Net Worth at Age 40
By age 40, your goal is to have a net worth of two times your annual salary. So, if your salary edges up to $80,000 in your 30s, then by age 40 you should strive for a net worth of $160,000. Additionally, it's not just contributing to retirement that helps you build your net worth.
The individual annual income of 24% of Americans exceeded $100,000 in 2020. The annual income of 34% of American households exceeds $100,000. In the five years to 2022, American households earning over $100,000 a year increased by 4.1%.
The upper middle class is often made up of highly educated business and professional people with high incomes, such as doctors, lawyers, stockbrokers, and CEOs.
The bottom line is: $100,000 is on the middle-class spectrum, but barely: 75 percent of U.S. households make less than that. Others prefer to define middle class by the lifestyle you can afford.
A Critical Number For Homebuyers
One way to decide how much of your income should go toward your mortgage is to use the 28/36 rule. According to this rule, your mortgage payment shouldn't be more than 28% of your monthly pre-tax income and 36% of your total debt. This is also known as the debt-to-income (DTI) ratio.
And yet, over half of Americans surveyed (53%) say that debt reduction is a top priority—while nearly a quarter (23%) say they have no debt. And that percentage may rise.