Calculate your expense-to-income ratio to understand how much of your income goes toward expenses. Useful for budgeting, loan qualification insights, and personal finance checks.
What the Expense-to-Income Ratio tells you
The expense-to-income ratio (EIR) measures what portion of your income is consumed by expenses. A lower ratio generally means better cashflow and savings capacity; a higher ratio can indicate budget stress and lower lending capacity.
Healthy ranges
While 'healthy' varies by region and personal circumstances, common guidelines:
- < 50% — typically comfortable (good savings potential).
- 50%–75% — manageable but watch spending and build emergency savings.
- > 75% — high expense burden; consider cost reductions or income increases.
How lenders use ratios
Mortgage lenders often look at debt-to-income (DTI) which is related; EIR is broader and helpful for personal budgeting. Use EIR with DTI to get fuller picture of obligations.
Limitations
EIR is a snapshot. Seasonal expenses, irregular bonuses, and annual bills (insurance, property taxes) should be normalized to monthly equivalents for accuracy.
Improving your ratio
- Track and cut discretionary spending (entertainment, dining out).
- Refinance or consolidate high-interest debt to reduce payments.
- Increase income with side work or career advancement.
- Adopt a “pay yourself first” savings plan.
Final thoughts
The EIR is a simple yet powerful budgeting measure. By keeping expenses proportionate to income, you create room for savings, investments, and financial resilience.
Frequently Asked Questions (FAQs)
1. What is a good expense-to-income ratio?
Generally, keeping expenses below 50% of income leaves healthy room for saving and investing. Above 75% may indicate financial strain.
2. Does this calculator include taxes?
It uses net income (after tax). Enter your take-home pay for accurate ratios.
3. How is this different from debt-to-income (DTI)?
DTI only considers debt obligations. EIR includes all recurring expenses — giving a fuller view of spending vs income.
4. Should savings be considered an expense?
Savings are not consumption, but you can include them as a “planned expense” if you want to track how much of income is committed.
5. What if my income varies month to month?
Use an average of several months or annual totals divided by 12 to smooth fluctuations.
6. Can I use this for household ratios?
Yes — enter combined household income and total household expenses for a family-wide EIR.
7. Does rent/mortgage include utilities?
The calculator separates them, but you can combine if your rent includes utilities.
8. How do I compare annual vs monthly?
Enter monthly numbers for consistency. If you only know annual values, divide by 12.
9. Will lenders accept this ratio?
Lenders typically look at DTI, but a strong EIR strengthens your overall financial profile.
10. Can I export my results?
Yes — click “Download CSV” after calculating to export a breakdown of your ratio.