Are you overdoing it on housing expenses?
- Housing costs the typical American $1,784 per month.
- As a percentage of average income, that’s a large amount to be spending.
There are certain expenses we all spend money on that are unavoidable — and housing is one of them. Unless you’re willing to live in your car (which, to be clear, you shouldn’t be), you’ll need to spend some amount of money to put a roof over your head, whether in the form of writing your landlord a monthly check or making a monthly mortgage payment.
But there is such a thing as spending too much money on housing. And recent data reveals that Americans may be going overboard in this particular expense category.
Are housing costs busting your budget?
The average American household’s annual income after taxes is $74,949. Meanwhile, the average American spends $1,784 a month, or $21,409 a year, on housing, amounting to roughly 35% of income.
The problem there is that as a general convention, it’s a good idea to limit your predictable housing costs to 30% of your take-home pay or less. That way, you won’t tie up so much money in housing expenses that you’ll risk falling behind on other bills.
At first glance, it’s clear the average American exceeds this 30% threshold. When we dig deeper, however, we see the average monthly $1,784 spent on housing isn’t just coming in the form of a mortgage or rent payment. Rather, it includes other housing-related costs, like utilities and household operations, which could include things like property taxes and maintenance.
As such, the average consumer isn’t going too overboard on housing — just a little. That’s because when we talk about that 30% threshold for homeowners, it generally does not include things like upkeep and maintenance (though homeowners who opt to spend more conservatively on housing may factor it into their personal calculations).
Still, it wouldn’t hurt for Americans to start spending less on housing. Doing so might free up money for other bills and important goals like retirement savings. If you’re spending a large chunk of your income on housing, you may want to take steps to reduce it. That could mean downsizing to a smaller apartment, refinancing your mortgage, or doing more home maintenance yourself so you’re not paying service professionals to do that work for you.