Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

The most relevant guideline for evaluating overall debt management is that housing debt should not exceed 36% of gross monthly income. This percentage considers all housing-related costs, which typically include mortgage payments, property taxes, and homeowners insurance. This rule is important because it helps ensure that individuals do not overextend themselves financially, allowing for sufficient income to cover other essential expenses, savings, and discretionary spending.

In contrast, while the other options provide useful benchmarks, they address different aspects of debt management. The guideline regarding total debt being within 28% focuses more on overall debt levels, which can be helpful but is often too conservative when considering housing expenses. The 20% guideline for consumer debt relates to non-housing debt and is intended to prevent excessive reliance on credit, but it does not encompass the overall picture of debt management in the same way. The emergency fund being 3 to 6 months of expenses, while crucial for financial stability, is not a direct measure of debt management but rather a guideline for savings and financial security.