How Much of Your Salary Should Go Toward Debt?
There is no single legal threshold, but a common guideline is that total monthly debt repayments should not exceed roughly 30–35% of your net take-home pay. If a larger share of your salary goes to debt leaving little for essentials, you may be over-indebted. The real test is whether you can meet essentials and debt comfortably — if not, seek a financial assessment.
Key Points
- A common guideline is 30–35% of net income for debt.
- Higher percentages may signal over-indebtedness.
- The real test is affordability after essentials.
- If debt crowds out essentials, seek an assessment.
Understanding the debt-to-income ratio
Your debt-to-income ratio compares your total monthly debt repayments to your net monthly income. A lower ratio generally means more comfortable finances; a higher ratio signals strain. Lenders and financial advisers often use this ratio to assess affordability.
See our dedicated guide on calculating your debt-to-income ratio for the step-by-step method.
When does it become a problem?
If more than about a third of your net income goes to debt, and especially if the figure approaches half or more, you are likely over-indebted. At that point, even a small income shock can push you into arrears.
The key question is whether, after debt and essentials, you have anything left for savings or emergencies. If not, the debt is unaffordable.
What to do if your ratio is too high
First, look for ways to reduce non-essential spending. If cutting back is not enough, a financial assessment can determine whether debt review is appropriate. Debt review restructures repayments to an affordable level for over-indebted consumers.
Acting early — before arrears accumulate — generally gives you more options.
Frequently Asked Questions
Worried That Your Debt Has Become Unaffordable?
Debt Guidance can assess your income, essential expenses and debt commitments to determine whether debt review may be appropriate.
Reviewed by Carolina Guevara Harris
Registered Debt Counsellor · NCRDC3152
Last updated: 17 September 2025
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