Question

Use the 20-10 Rule to calculate the debt limits for Jesse's brother and sister.

Jesse's Brother: Annual Net Income of $24,750
Jesse's Sister: Annual Net Income of $35,800

Answer 1

Jesse's brother total debt limit =$24,750 x 20% = $4,950

his monthly payment should not exceed ($24,750 / 12) x 10% = $206.25

Jesse's sister total debt limit = $35,800 x 20% = $7,160

her monthly payment should not exceed ($35,800 / 12) x 10% = $298.33

the 20/10 rule is a rule of thumb, meaning that it is not exact, it only gives us a parameter.