Your debt-to-income ratio is basically an expression of the relationship between how much you owe and how much you earn. Lenders will use your debt-to-income ratio, alongside your overall credit rating, to evaluate your financial situation and decide if you qualify for credit. The ratio is determined by dividing all of your monthly debt repayments by your income. Generally speaking, the lower the ratio, the better your financial situation and the greater chance of securing credit.

If you have a clear understanding of your debt-to-income ratio, it’ll help you take stock of your financial situation, which will help you decide whether or not you should be considering further credit or debt help. If your debt-to-income ratio is high, you should definitely be taking significant steps to solve your mounting debt problem. Essentially, calculating your ratio leaves you in little doubt as to your financial situation. There is no denying the debt anymore and the sooner you face up to your debt, the greater the likelihood of finding a suitable debt solution for someone in your circumstances.

As much as calculating you debt-to-income ratio can serve as a wakeup call to the severity of your mounting debt, it can also be a great way to stay motivated and keep you on the right track. If you keep doing the calculations as you stick to a programme of debt repayment or successfully follow through with a debt solution, you can track your progress and keep your morale up.

Debtsolver, the UK debt solution specialist and financial first-aider, have complied these easy to follow steps that will help you to calculate your debt-to-income ratio.

Firstly, add up all of your monthly debt obligations. That means all of them; this is no time for self delusion.  Be sure to include all of your credit card debt; every loan, the unsecured and secured; your monthly mortgage repayments and your overdraft. If you rent rather than own, you should incorporate your rent in the same way as you would a mortgage at this stage. Basically, you want to find your bottom line debt commitment.

Now that you have your definitive monthly debt obligation worked out, divide it by your monthly income to work out your debt-to-income ratio. Debtsolver recommend using your net income rather than your gross income as everyone has to pay tax on their gross income. If you use your gross income, your debt-to-income ratio will appear more healthy than it actually is.

In the same way as your credit rating will impact on your ability to secure credit and influence the rates of interest that you’re offered, the higher your debt-to-income ratio, the less likely you are to be approved for credit and the higher interest rates you’re likely to be charged. You could also find that you’re asked to make a far bigger down payment in order to secure a mortgage.

If you are looking to tackle a debilitating debt burden, Debtsolver will be able to take you through the various debt solutions on the market in the UK and help you to decide on the one that best suits your circumstances. You will then be on the road to freedom from debt and will be able to chart your progress by calculating your debt-to-income ratio.

In the UK, deductions from your self-assessment tax return can amount to substantial savings. These savings can help you to battle debt problems and can amount to a welcome tax rebate at a time of year when funds are notoriously tight. It can be difficult to know what you can discount as a business expense and what you can’t though. For inspiration, here are some real examples from our cousins across the pond, courtesy of Debtsolver.

Firstly, the top ten successful tax reductions…

1. The owner of a petrol station gave away free beer instead of trading stamps and the Tax Man felt that this is a legitimate business expense.
2. An “exotic dancer” had her chest enlarged to a 56-FF and as a stage prop essential to her act, they were tax deductible.
3. Your babysitter can be a charitable deduction, if you employ her to look after your children while you are off doing charitable works in the community.
4. Necessary business trips are tax deductible but the owners of a dairy business did manage to write off their Safari because a lot of the activities had an animal focus.
5. Pets are considered personal effects so if your job requires a move, transport for your furred, feathered or finned friend is deductible.
6. Hold a business meeting in Bermuda and it can be written off. Same with Barbados, Costa Rica, Dominica, the Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Saint Lucia, Trinidad and Tobago, Canada and Mexico… If you’re from the U.S.
7. If you’re a professional bodybuilder, you can write off all of that essential body oil. Glistening muscles can be a genuine tax write-off.
8. For a couple who rent out a holiday home, having their own jet is a fully deductible expense as they have to go and check on it occasionally.
9. A nightclub promoter hired a few leggy lovelies for a launch and the tax man allowed him to write them off as decoration.
10. When a man was told to get more exercise, he felt swimming was a good option. So, he installed a pool and was able to deduct it from his tax as a necessary medical expense, including its heating, cleaning and general upkeep.

If those passed, what were the unsuccessful claims? Here are the top 5 that weren’t so lucky.

1. A man tried to deduct whiskey as a client gift but the category he chose was client entertainment, it wasn’t allowed and it violated state laws.
2. The owner of a failing furniture business hired someone to burn it down, not only to collect the $500,000 insurance money but also to deduct the $10,000 expense of hiring the arsonist.
3. You can’t deduct expenses of illegal professions. Sounds obvious? Well, tell that to the prostitutes that try to deduct the cost of condoms.
4. If you buy your own prize-winning racehorse, name it after yourself and then take clients to watch it run, it’s not a business expense, it’s a personal expense.
5. Even though we’ve heard that someone deducted a pool as a medical expense, taking dance lessons doesn’t count. So, dancing to relive varicose veins, dancing to cure arthritis and dancing to alleviate nervous disorders just won’t cut it.

When it comes to trading and investment, the focus is very much on the balance between risk and reward. Long shots can pay off big but they can also leave you in serious debt danger. With this slightly ominous sentiment still ringing in your ears, here are some pretty out-there investment options that the debt specialists at Debtsolver would definitely recommend that you treat with real trepidation. In fact, these fringe markets are probably best left well alone.

Freight derivatives are a relatively popular fringe trade. The Baltic Exchange offers trading on Forward Freight Agreements (FFAs). Basically, one trader bets another about how much it’ll cost to transport something in the future. For example, how much it’ll cost to ship crude oil from Shanghai to Rotterdam on the 25^th of February, 2015. You bet, wait until the day arrives and check the daily shipping rates as displayed by the Baltic Exchange. Companies will tend to do this to hedge against rising oil and geopolitical risks to shipping. It’s a risky business.

Betting on the weather is not something to be recommended but so great is its impact on business that there are those who do. We’re not talking about the odds on a sunny weekend either. It’s about the average over time, divided into ranges and packaged up for trade. A warm winter will affect power company revenue by decreasing fuel demand. They’ll often hedge against this by buying a contract that’ll pay out if the temperature averages at five degrees above the historical average for the winter.

European businesses that produce carbon dioxide as a side effect of their business activity are afforded an allowance of carbon credit. Should they go over this allowance, they have to buy more carbon credits to make up for it. North America is beginning to test out similar programmes now but European-based carbon futures can already be traded. The value of carbon credits depend on environmental legislation, geopolitical issues and the price of fossil fuels like crude oil and natural gas.

Think you can pick out the Oscar winners and summer blockbusters? The Commodity Futures Trading Commission (CFTC) is investigating whether investors should be able to buy and sell futures based on how much money a film will take in its first month. It’ll be a bit like the Hollywood Stock Exchange and buying futures will be based on picking surprise hits and selling futures will be based on picking out the unforeseen failures. Big-time financiers, producers and distributors will attempt to hedge the millions they’ve already invested with this kind of future trading.

Investments are a notoriously unpredictable and volatile market to start with and these fringe markets really are only for those traders with huge bankrolls and a keen understanding of the risks. They call for hugely specialised knowledge of the market and substantial investor credentials. They are showing growth though, with vast sums of money passing through them annually. As we said at the beginning, with the potentially huge rewards comes massive risk and it can all turn to crippling debt in no time. Don’t manage your debt with long shots. Talk to a dependable debt specialist like those at Debtsolver and free yourself from the burden of bad debt.

There are a number of online debt calculators available to UK consumers who are concerned about their level of personal debt. Many of these tackle different areas of personal finance; mortgage calculators, debt consolidation calculators and general loan repayment calculators are amongst the most popular. There is no denying that these calculators can be useful tools when trying to get a more detailed understanding of your financial circumstances. However, there is no substitute for dedicated debt advice and the expertise of a specialist.

If you are looking for a solution to your mounting debt problem, the sooner you seek out help, the better your chances of finding a solution that will allow you to avoid bankruptcy, repossession and the other severe effects of bad debt. Using these debt calculators can help you come to a better understanding of your financial situation, which can then help you to come to a decision on the right debt solution to suit your circumstances.

The Financial Times is an excellent resource for personal finance tools. They have a few online calculators, including a debt calculator, a mortgage calculator and a pension calculator. Each can play an important part in coming to terms with the extent of your debt problem.

The mortgage calculator at Quote.com allows you to calculate a simple monthly payment, look at the possible effects of prepaying your mortgage and hypothetically adjust the composition of your many future monthly mortgage payments. This can be particularly helpful in allowing you to project your future mortgage-interest tax write-off. It can simulate your equity increase or the drop in interest as a percentage of your monthly payment.

You should never take on any debt without first deciding whether or not you can afford to repay it. Any potential doubt in your ability to service the debt is recipe for serious debt problems. This calculator from The Motley Fool allows you to calculate the potential monthly repayment and the total amount repayable on any loan.

This calculator from the Guardian aims to provide quite a full picture of your debt. You input all of your details and it will show you how much interest you owe, how much it’s costing you and when you’ll pay off the debt. The calculator can also show you the impact that a debt consolidation loan could have on your overall debt and your ability to meet monthly repayments.

Debtsolver have taken a novel approach to the debt calculator, instead using the information that you input into our debt wizard to give you a financial health check-up. Based on this information, their advisors can prescribe a debt solution that could cure you of the burden of bad debt. On the other hand, this could provide reassurance that your level of personal debt is within healthy parameters.

12-year-old runs up $1,300 FarmVille debt

A little boy has recently racked up some big debt, playing the extremely popular Facebook game, FarmVille. The game has a function that allows players to buy in-game coins for real-world money and this young farmer managed to run up about a thousand pounds worth of debt on his mother’s credit card. His mother is now hoping that her tale of debt woe will serve as a warning to other parents, to watch what their children get up to on these social networking games.

FarmVille is currently one of the most popular games on Facebook, with well over 80 million users. The idea behind it is that each new farmer is given some virtual funds to start a farm. They then use this funding to grow crops which they can then sell for more pretend money and recycle it into their farm. However, trading on the impetuousness of the average internet user, FarmVille offers the ability to buy extra virtual money with real-life credit.

As the boy lives with his mother, Zynga – the makers of FarmVille – have refused to offer any kind of refund as they feel it is the responsibility of the parent to monitor a child’s online activity and look after their credit card. In addition to this, children under the age of 13 are not permitted onto the social networking site, so Facebook has disabled the boy’s account and refuse to take any responsibility for his actions. Although the woman does blame her son, she feels there should be some portion of the blame laid on Facebook as she feels they weren’t acting responsibly. Ultimately, she feels that her son was using another person’s credit card and that should flag some kind of security. In addition to that, the secure payment filter is bypassed for payments on Facebook.

This case highlights the importance of looking after your credit card, the dangers of online transactions and most clearly, the unique routes into debt that can happen suddenly and without warning. Financial circumstances are subject to unexpected change and this is when bad debt can begin to mount up. Talking to a dedicated financial advisor can help you to react quickly in the event of these unforeseen circumstances, helping you to avoid severe debt problems. The sooner you get in touch with a dedicated debt advisor and tell your creditors about the potential struggle in meeting repayments, the more likely of you are of reaching a mutually beneficial conclusion.