D.C. millennials rank high as responsible spenders

(Elise Amendola/AP)

If you stroll along 14th Street in Northwest Washington and see all the pricey bars and restaurants brimming with millennials, you might assume that they’re spending way too much money on fun.

While that may be true of some millennials, Credit Karma, a credit and financial management website, found that people in that age group in the District rank fourth in the nation for responsibly handling their money — or at least not racking up too much debt compared with their income.

Credit Karma’s research found that the average millennial in Detroit, which ranked first for responsible spending, had a credit card debt-to-disposable income ratio of 11.79 percent. D.C. millennials had a credit card debt-to-disposable income ratio of 13.83 percent. In Scottsdale, Ariz., the city that came in with the lowest ranking, the credit card debt-to-disposable income ratio was 36.01 percent.

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The company evaluated its database of 45 million members to find the average credit card balance of millennials (which they defined in this case as people ages 18 to 34), who live in the 100 largest cities in the United States and have at least some credit card debt. Then the company checked Census Bureau data for the average annual income of millennials in those cities and, using data from Zillow, subtracted how much a typical person in those cities might pay in rent to come up with the disposable income figure.

A traditional debt-to-income ratio, which compares the minimum payment on all your monthly debt with your gross monthly income, is an important element of determining not only your financial health in general, but also your loan qualifications for a home purchase.

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While some loan programs offer flexibility, in general lenders require an overall debt-to-income ratio 43 percent or less, including your total housing costs. The housing costs portion should be about 28 percent of your gross monthly income, leaving 15 percent at the most to cover your minimum payments on car loans, student loans and credit card debt. A lower debt-to-income ratio indicates you’re handling your money wisely.

D.C. millennials, according to the study, have an average of $38,058 in disposable income and $5,263 in credit card debt.

The top 10 cities are: 1) Detroit; 2) Jersey City, N.J.; 3) St. Paul, Minn.; 4) Washington, D.C.; 5) San Bernardino, Calif.; 6) Newark, N.J.; 7) Milwaukee; 8) Philadelphia; 9) Baltimore; 10) Cleveland.

To see the full report, click here.

Michele Lerner is a freelance writer. To pass on a tip or news item, contact us at realestate@washpost.com and put “Town Square” in the subject line.