Lower Your TDS And Change Your Future

Lower Your TDS And Change Your Future

Managing finances can be overwhelming, especially when it comes to debt. One major aspect that requires attention is your TDS - Total Debt Servicing, which calculates how much money is needed annually for your loan repayments and other debts. The lower your TDS, the better you can manage your finances and secure your future financially. In this blog post, we will discuss how to calculate your TDS, the ideal TDS for most families, and the benefits of lowering it to below 20%.

To begin calculating your TDS, you must first add up all your debt payments, including your mortgage payments, credit card balances, and other loans. If you make biweekly mortgage payments, multiply this payment by 26 and divide by 12 to convert it to monthly payments. For credit card debt, take 3% of the outstanding balance and add it to your total debt. Subtract property tax payments if you pay them separately from the mortgage payments. Once you have the total, multiply it by 12 to get the annual amount you need to pay for your debts.

Let us assume that your monthly cost is $3,000 and your annual income is $100,000. To calculate your TDS, multiply $3,000 by 12, which gives you $36,000 for your annual debt cost. Now divide $36,000 by $100,000 to get 36%. This percentage is your TDS, meaning 36% of your income will go towards debt payment.

While there is no standard TDS, most families aim for a TDS ratio of around 35%. This percentage corresponds to both TDS and savings rate, which means that if your TDS is 36%, investing would not be possible. Ideally, your TDS ratio should stay below 20%. Clients who save the most money have a TDS below this ideal percentage, which makes their financial situation more stable and secure.

Lower TDS is not just about being debt-free but also about having disposable income for investing and savings. A lower TDS ratio means that you have more money left for discretionary spending and savings, which could lead to an improved quality of life. This could mean fulfilling long-term financial goals like saving for retirement, buying a house, or paying for children's education.

In conclusion, Total Debt Servicing is an essential factor to consider when managing finances. Understanding your TDS ratio and lowering it below 20% will provide you with financial security and peace of mind. While achieving a lower TDS can be challenging, it is possible with proper financial planning and disciplined spending. A low TDS not only means you have less debt but also presents opportunities for investing and increasing your savings. Take control of your TDS today and change your financial future.

You can reach me at 604-710-8934 by text or phone and by email at karen.canning@mortgagegroup.com to discuss solutions built for you.