The following post by COSurvivalist, Samuel Westfall, about income to debt ratio. This is an important topic to know and understand, as your finances, and your credit, exist around this calculation.

You have heard it before; you may have read it a dozen different ways, but the fact remains the same; you should have a higher income to debt ratio. There are literally a ton of books written on this subject, more websites than you can count, and they all offer different thought processes about this.

(Tip: Improving your credit can save you money. Check out: How To Free Up Extra Money Quickly)

Protect Your Credit And Your Wealth: Income to Debt Ratio


While you can change jobs or careers to change your income, you make what you make, and that is what you have to work with. You can add additional jobs, but that may not drastically change your income.


This is where you are mostly in the driver’s seat. Some bills and debts you can negotiate down if you work hard enough, some you cant. Replacing or eliminating some of your recurring bills (changing from high-end cable to streaming devices, for example) will reduce your monthly debts and give you some cashback.

Debt Ratios

In general, you want to stay under a 15% utilization on your rotating debts. By continuously pushing to drive down the balances on your debts will help your ratios.

Cash on Hand

I know how paychecks come into the account, get divvied out to your bills and little is leftover, but setting some aside for you is just as critical as paying your bills. When the power goes out, and you can’t get cash from any ATM’s or banks, cash on hand will be essential to pay for some immediate short-term need.

Credit Reports

Knowing what is on your credit report is crucial. Continuously work to improve your scores by removing false data and paying down your debt.

Stop spending on stuff you don’t need. Don’t buy brand new (electronics, games, movies, vehicles) unless absolutely necessary. While some big-name stores offer gear for far lower prices, the equipment doesn’t hold up after it’s first used, so spend a bit more on the quality that will last. Small changes in your spending habits add up in cash on hand or savings very quickly.

Helpful Tips

Clean your credit report – You can obtain a copy of your credit report from the three major companies once per year for free (listed below). No sign-up, no credit card, write them a request.

  • Experian:
  • Transunion:
  • Equifax:

Budget – Write out a real number budget, hold to it, take the unspent money, and roll it towards a bill or your savings account. Plenty of resources to help you with this.

Refinance – If you purchased something a while back on a high-interest loan, but now your credit score has improved, refinance that loan at a lower interest rate.

Consolidate – Move your multiple high-interest credit card balances into a low or zero interest card or loan to save yourself.

Reduce spending waste – You may want, but you don’t need, those magazine subscriptions, those monthly box subscriptions, the latest gadget. While there is the convenience of shopping local, you can almost always find the same thing online for cheaper.

Save where you can – Don’t be above using coupons or discounts, shop for deals. Ask, the worst someone will tell you is “no.”

Move to a Credit Union – This one is simple: help your money help you and others instead of putting money in someone else account.

Evaluate your money – From reviewing your savings account (there are higher interest accounts available) to reviewing your 401k investments, evaluating what your money is doing is essential. Make smart decisions to earn you more.

Find resources to learn more – One of my favorite sites to review financial information from different sources is NerdWallet.

Planning and preparing for an event or disaster includes all kinds of prep; this includes having your finances and debt in order. Having a stockpile of money in your retirement accounts, having a savings account, and always have some cash on hand, just in case.

If you enjoyed this article, please like, share, and comment.

Thank you, COSurvivalist, for your thoughts on this subject. Even if you are a financial pro, or already FIRE, these are necessary steps that should be considered, at minimum, annually. If you have any questions on this, or any other financial matter, be sure to connect with me. I’d be happy to answer your questions. – Michael Dinich 


About the Author

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Michael launched Your Money Geek to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.

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