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Affordability Formula:
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The Affordability Calculator determines whether your monthly income can comfortably cover your monthly bills. It provides a simple yes/no answer based on the relationship between your income and expenses.
The calculator uses the affordability formula:
Where:
Explanation: If the result is greater than 0, your income exceeds your bills, indicating affordability. If less than or equal to 0, your bills exceed or equal your income, indicating unaffordability.
Details: Understanding your financial affordability is crucial for budgeting, financial planning, and avoiding debt. It helps determine if you're living within your means and identifies when cost-cutting measures may be necessary.
Tips: Enter your total monthly income and total monthly bills in dollars. Include all sources of income and all regular monthly expenses. Both values must be positive numbers.
Q1: What counts as income for this calculation?
A: Include all regular monthly income sources - salary, wages, freelance income, investment income, and any other consistent earnings.
Q2: What bills should I include?
A: Include all regular monthly expenses - rent/mortgage, utilities, loan payments, insurance, groceries, transportation, and other fixed monthly costs.
Q3: What if the result is "No"?
A: If unaffordable, consider reducing expenses, increasing income, or both. Review your bills for non-essential items that can be eliminated or reduced.
Q4: Is this calculation comprehensive for financial health?
A: This is a basic indicator. For complete financial health assessment, also consider savings, investments, emergency funds, and long-term financial goals.
Q5: Should I include irregular income or expenses?
A: For irregular items, calculate monthly averages to get a more accurate picture of your financial situation over time.