How do your housing costs compare?
- 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 of the various expenses that monopolize your income, it is natural to point to housing as one of the most important. In fact, many Americans spend more money on housing than on any other expense category, from food to transportation to health care.
But it is also important not to exaggerate housing costs. If you do, you could put yourself in a position where it’s hard to meet your remaining bills or meet your financial goals.
Now, it may or may not help you to know that the average American spent $1,161 a month on housing in December, according to recent data from Morning Consult. But no matter 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 at 30% of your net salary or less. If you are someone who rents a house, that means your rent should not consume more than 30% of your salary. If you’re looking to buy a home, however, this math gets a little more complicated.
As a landlord, that 30% threshold really should include all of your foreseeable monthly housing costs. These include your:
- Mortgage payment
- Property tax account
- Home insurance premiums
- HOA fees, if you are buying a home that is part of a homeowners association
Also, for added protection, you may want to limit home maintenance to this 30% limit. Home maintenance isn’t always predictable, but there are certain costs you can plan ahead, like having your gutters cleaned twice a year or having your lawn maintained weekly (assuming you outsource that work and don’t do it yourself).
Are your housing costs too high?
You may have already signed an apartment lease or purchased a house, but are struggling to meet your costs. If so, you may need to make changes to avoid a scenario where you fall behind on your rent or mortgage payments.
One option is to reduce non-essential expenses in your budget. If you spend a lot on entertainment and meals away from home, reducing these expenses could free up more money to cover your housing costs.
If not, it might be time to consider a second job to supplement your income and meet your housing expenses. The good news is that the gig economy is full of opportunities to make money on the side, so working a second job could be your ticket to staying on top of your bills.
While it might be interesting to see what the average American spends on housing, the reality is that you should focus on your own income and bills to determine how much you can afford to spend in this category. Hopefully, running your own numbers and sticking to the 30% rule will help you avoid the headaches and struggles of doing so.
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