It's Your Money:

Don't let your creditors set your spending budget. You have been judged creditworthy by some entity (Fleet, Visa, AOL) that is willing to let you borrow money for a short period of time. Though your credit limit may add up to $30,000, that is not money you should feel free to spend carelessly.

Who Made That Ratio?

Ignore banker's mentality. Your debt-to-income ratio is the measure of how much debt you carry to how much money (after taxes) you have coming in. In the world of lending, it is "acceptable" to carry 25% of your income in debt. Consider this example:

Total credit card debt: $6,437
Total after-tax annual income: $30,000
Debt-to-income ratio: 6,437/30,000 = 21.4%

A 21.4% debt-to-income ratio is too high in our opinion. The ideal number of course is zero. But at the very least you want to keep your debt - including car loans - to 15% or less of your after-tax income.

Next up - Read The Fine Print

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