More For Your Money - University of Illinois Extension

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The Lopez Family Credit Limit

Another good guideline is to use no more than one-third of your money left after paying basic living expenses on credit payments. Basic living expenses are your rent or mortgage, utilities, food, clothing, transportation, medical expenses, and savings.

Activity

Let’s Take a Look at the Lopez Family

How much can they afford to pay on monthly credit payments?

1. Monthly take-home pay $1,500
2a. Basic living expenses  
    Mortgage or rent $400
    Utilities $50
    Food $200
    Transportation $25
    Clothing $25
    Medical expenses $25
2b. Total basic expenses $725
3. Money left after basic living expenses (monthly take-home pay minus total basic expenses) $775
4. Divide money left after basic living expenses (line 3) by three. $258
$258 is the amount the Lopez family can safely spend on credit payments each month.