Dave's take-home-pay per month is $2,200. What is the maximum dollar amount of debt payments, excluding a home mortgage, he should have?
A) $880
B) $440
C) $330
D) $220
E) $0

Question

Quizplus · Accepted Answer

The general rule of thumb is for debt payments to not exceed 36% of your gross income. Based on Dave's take-home pay of $2,200, we can estimate his gross income to be around $2,900 ($2,200 divided by 0.76). Multiplying this by 0.36, we get a maximum debt payment of $1,044 ($2,900 multiplied by 0.36). However, we need to exclude a home mortgage, so let's assume that takes up 25% of his gross income, leaving 11% of his gross income for other debt payments. This amounts to $319 ($2,900 multiplied by 0.11). Therefore, the maximum dollar amount of debt payments Dave should have, excluding a home mortgage, is $440 (rounded to the nearest ten dollars based on the answer choices provided).

Dave's Take-Home-Pay Per Month Is $2,200