Percentage of Income Model

The Percentage of Income Model is a financial approach used to plan and predict expenses based on a set percentage of a person's or household's income. For example, a guideline might suggest that 30% of your income should go towards housing costs. This model helps individuals allocate their budget effectively by ensuring spending remains proportional to their earnings, allowing for savings and covering other expenses without overextending. It provides a framework to maintain financial health and avoid debt by aligning spending habits with income levels.