What is the Debt-to-Income ratio and how do I know what's good and what's bad??

This is an interesting question... The recommended debt ratio varies depending on the source that defines it... Most use your "Gross Income BEFORE taxes and other deductions". Then the formula is: "Monthly Debt Payments / Gross Monthly Income" = ?? percent... After taxes, health benefit payments, 401K contributions, and other deductions are removed, it doesn't leave much take home money to pay the actual debt...

Here are some general guidelines:

• 35% or less: This is an average debt load for most people. If you keep your ratio around 15%, you're in great shape
• 36%-42%: You need to control your credit spending and work on a plan to start retiring some of your debt
• 43%-49%: You could soon face financial difficulties unless you start lowering your debt now
• 50% or more: You may need to seek professional help to aggressively reduce your debt load

Bottom line is: If your debt-to-income ratio is too high, you will likely be forced into a higher interest rate when applying for loans and you could even be turned down!.