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How do your housing costs compare?
Key points
- Housing tends to be the typical American’s largest monthly expense.
- It’s important not to overspend on housing so you don’t fall behind on your remaining bills.
When you think about the different expenses that monopolize your income, it’s natural to point to housing as one of the largest. In fact, many Americans spend more money on housing than any other expense category, from food to transportation to healthcare.
But it’s also important not to go overboard on housing costs. If you do, you could put yourself in a position where it’s hard to keep up with your remaining bills or work toward your financial goals.
Now it may or may not help you to know the average American spent $1,161 a month on housing in December, as per recent data from Morning Consult. But regardless of what the typical American might spend on housing, it’s important to run your own numbers and figure out what’s affordable for you.
What should your housing costs look like?
As a general rule, you should aim to keep your housing costs to 30% of your take-home pay or less. If you’re someone who rents a home, that means your rent shouldn’t eat up more than 30% of your paycheck. If you’re looking to buy a home, however, that calculation gets a little more complicated.
As a homeowner, that 30% threshold should really include all of your predictable monthly housing costs. These include your:
- Mortgage payment
- Property tax bill
- Homeowners insurance premiums
- HOA fees, if you buy a home that’s part of a homeowners association
Furthermore, for added protection, you may want to lob home maintenance into that 30% limit. Home maintenance isn’t always predictable, but there are certain costs you can anticipate, like having your gutters cleaned twice a year or having your lawn tended to every week (assuming you outsource that work and don’t do it yourself).
Are your housing costs too high?
It may be the case that you’ve already signed an apartment lease or purchased a home but are struggling to keep up with your costs. If that’s true, you may need to make changes to avoid a …….