What is defined by the 20-10 rule?

The 20-10 rule provides a guideline for managing debt in relation to income, suggesting that an individual's total debt should not exceed 20% of their annual income and that monthly payments should not surpass 10% of their monthly income. This principle helps individuals avoid overextending their financial responsibilities and encourages responsible borrowing habits. By adhering to these percentages, it becomes easier to maintain a sustainable level of debt, promoting financial stability and reducing the risk of default or financial distress. Understanding this benchmark is crucial for making informed decisions about borrowing and ensuring that debt remains manageable.