When calculating savings/debt, why is gross income used and not after tax income?
I've been using those mortgage and savings calculators online and they always say that a monthly rent/mortgage payment should be roughly 30% of your gross monthly income. Why gross income and not after tax income? There is quite a difference between those two numbers, especially if you are self employed or contributing a lot to a retirement fund through an employer. That makes your available cash in savings much less than your gross total earnings. That didn't answer my question.
Public Comments
- mortgages are always figured on gross income. That may be part of the problem with lending today
