The 20-10 Rule for Consumer Credit

A conservative rule of thumb for other consumer credit, not counting a house payment, is called the 20-10 rule. This means that total household debt (not including house payments) shouldn’t exceed 20% of your net household income. (Your net income is how much you actually “bring home” after taxes in your paycheck.) Ideally, monthly payments shouldn’t exceed 10% of the NET amount you bring home. For example, if you bring home $60,000 per year, your total consumer debt shouldn’t exceed $12,000 and total monthly payments shouldn’t exceed $500 per month.