By MIKE GOLDSTEIN
Want to know how financially responsible you are? Comparing your credit card bills to how much you earn can be a good indicator. We took a look at millennials in America's 100 biggest cities and compared their credit card debt to their expendable income (average income minus average rent costs) to find the places where millennials are spending the least in comparison to what they're making. Here's what we found.
Top 5 cities with the most responsible spenders
1. Detroit, MI
Detroit is just plain affordable. After coming in at number two in our list of best cities for millennials to buy a home, Detroit takes home the title of city in America with the most financially responsible millennials.
Millennials in Detroit have an average expendable income of $25,511, which ranks them toward the middle of the cities we looked at. What sets them apart, though, is an average credit card debt total of just $3,007, the lowest in the nation. Their credit card debt to expendable income ratio comes in at just 11.8 percent.
2. Jersey City, NJ
Jersey City takes a different path to the top. At $4,043, Jersey City's millennials have a much higher average credit card debt total than Detroit's. However, salaries are higher too, with the average expendable income coming in at $32,571. All of this adds up to a slightly worse, but comparable, ratio of credit card debt to expendable income - 13.3 percent.
3. Saint Paul, MN
Saint Paul splits the difference between Detroit and Jersey City. At $24,944, Saint Paul millennials don't have quite as much expendable income as their counterparts in Jersey City. But with $4,043 in average credit card debt, Saint Paul has the numbers to come out with a 13.5 percent ratio.
4. Washington, DC
Millennials in DC have racked up some serious credit card debt ($5,263 on average), ranking 18th highest out of the 100 cities we ranked. But they balance it out with $38,058 in average expendable income, bringing their ratio to 13.8 percent.
5. San Bernardino, CA
San Bernardino's $22,157 in expendable income ranks them near the bottom of our list, but the city's millennial residents have racked up just $3,082 in average credit card debt balances. Their credit card debt to expendable income ratio: 13.9 percent.
The bottom 5 cities
Here are the five cities that came in at the bottom of our list:
1. Scottsdale, AZ
Millennials in Scottsdale have the highest average credit card debt out of the 100 cities we looked at, coming in at a whopping $6,922. Rent's not as bad, but $19,224 in expendable income still ranks toward the bottom of our list and a 36 percent credit card debt-to-income ratio is the result.
2. Irvine, CA
Salaries aren't too low in Irvine, and expendable income comes in at a decent $18,233. However, an average credit card debt total of $6,519 leaves Irvine's millennials with a high 35.8 percent ratio.
3. Miami, FL
For Miami's millennials, high rental costs turn a decent average salary ($30,728) into slim expendable income ($14,484). Pairing that with high credit card debt ($4,906) leaves Miami with a 33.9 percent ratio.
4. Hialeah, FL
Rent is expensive in Hialeah and the average millennial only earns $28,477. This leaves Hialeah's millennials with just $13,284 in expendable income. With an average credit card debt of $4,155, their ratio rests at 31.3 percent.
5. Virginia Beach, VA
Virginia Beach's millennials have the third highest credit card debt totals of our 100 cities - $6,767. The $22,374 in disposable income that the average millennial takes home isn't enough to make up for it either. Their ratio: 30.2 percent.
Why debt-to-income ratios vary
It might seem like consumers with low credit card debt-to-income ratios are just more responsible, but there are many reasons why some people might have a higher credit card debt-to-income ratio than others.
- Cost of living plays a huge role in daily expenses. Credit card debt isn't all shopping sprees and expensive dining, and most people put the basic expenses of daily life (like food, clothes and gas) on their credit cards. Living in an expensive city with a comparatively low salary could result in a high ratio.
- Pricey real estate markets also drive up ratios for many of these cities. If you live in an expensive housing market like San Francisco, your salary won't stretch as far as it could in Detroit.
- Good spending habits may factor into your debt-to-income ratio as well, though. Figuring out exactly how much you can spend on luxuries like eating out and entertainment each month is a key part of budgeting, and it starts with taking a realistic look at how much expendable income you really have. If your spending habits outpace your expendable income, you could end up with a high debt-to-income ratio.
Why your debt-to-income ratio matters
Your traditional debt-to-income ratio takes into account your monthly debt payments (including things like student loan payments and credit card debt) and your monthly income (not just your expendable income) and it can factor heavily into lending decisions. Your income doesn't appear on your credit report at all, and it won't directly affect your credit score, but many lenders will ask you about your salary. Mortgage lenders often won't lend to you if taking out a home loan will boost your debt-to-income ratio above 43 percent.
Even if you're not looking for a loan, your debt-to-income ratio is still an important measure of your financial health. The bigger your debts are when compared to your income, the less likely you'll be able to pay them on time and avoid racking up additional charges like interest and late fees.
Debt-to-income ratios aren't a perfect measure of personal responsibility -- where you live and how much everyday items cost there can have a big impact on your expendable income and your credit card debt totals. Still, it's a really important metric to keep an eye on, especially if you're looking to get more credit in the future.
This list is an approximation of spending habits created using publicly available US Census information, data from Zillow and our own information sourced from the millions of Credit Karma members between the ages of 18-34 who live in America's 100 largest cities and have credit card debt. It should be used as a guide only, and is not to be seen as a definitive judgment of the spending habits of millennials who live in these cities.
The data assesses the average, revolving credit card debt of 18-34 year olds in these cities as a proportion of disposable income in America's 100 largest cities. The calculation uses the average credit card debt of Credit Karma members between the ages of 18-34 among those who have open credit cards. For disposable income, it takes into account the median income by city for 18-34 year-olds, according to the US Census, and subtracts the average rental costs, according to Zillow. Our calculation assumes that residents of each city were sharing their house with one other person.
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