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Deal with Your Debt: The Right Way to Manage Your Bill$ and Pay Off What You Owe by Liz Pulliam Weston

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The Proper Role of Cars in Our Spending

Now that you've digested all that, you can better understand why it's so difficult to answer the following question:

“I recently graduated from college and want to set up a budget. I'm trying to decide how much I can afford to buy a car. Do you have any rules of thumb?”

Well, no, unfortunately. There's really no good guideline for auto purchases, as there is for housing costs, which generally shouldn't exceed 25% of your gross income.

Some debt counselors suggest that you keep your total debt load to 35% to 40% of your gross income. (Most include housing costs in that figure, even if you're renting rather than paying a mortgage.)

The problem with that advice is that it focuses too much on monthly payments ...

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